In the context of mergers, what does the term "incremental post-merger cash flows" refer to?

The term "incremental post-merger cash flows" specifically refers to the additional cash flows generated as a result of the merger that exceed what was expected based on the performance of the target firm prior to the merger. This concept is crucial in evaluating the financial benefits derived from a merger because it focuses on the synergies and value creation that result from combining two companies.

When analyzing a merger, it's important to look at how the two firms can work together to generate more cash than each could have on its own. This includes cost savings from redundancies, new revenue opportunities from cross-selling products, and benefits gained from increased market power. The incremental cash flows take into account these synergies, thereby demonstrating the merger’s financial rationale.

In contrast, the other options do not capture the essence of "incremental post-merger cash flows" as accurately. For instance, cash flows from sales following a merger may include contributions from both firms but do not specifically account for the incremental value created. Expected cash flows only from the acquired firm limit the analysis to one side of the equation, and the overall financial impact of all combined operations could encompass various factors unrelated to the increment specifically recognized due to the merger. Thus, the distinction made in option C is critical for understanding