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Hi John,
The additional value created by acquisition is also refered to as Synergy.
I am thinking that Premium and Synergy is basically the same thing, except that the Premium paid would decrease or eliminate the synergistic value to the acquirer.
I need to know if this thought is correct. Very timid on this trying to hold on.
It is synergy that gives rise to the fact that the value of the combined company is higher than the total value of the two companies separately.
This extra value is the most extra (i.e. premium) that the acquirer can afford to pay for the other company.
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