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Financial Merger

A merger in which the firms involved will not be operated as a single unit and from which no operating economies are expected. The incremental post-merger cash flows are simply the expected cash flows of the target firm.

Operating Merger

A merger in which, operations of the firms involved are integrated, in the hope of achieving synergistic benefits. In this case forecasting future cash flows is more difficult.

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Q: What is the difference between a financial and an operating merger?
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