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CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Bharat Auto Ltd merged with a component maker, expecting annual cost savings from combining plants. After a year, savings are far below plan because overlapping plants were not consolidated and procurement was not centralised. What is the best description of the gap?

The gap is a failure to realise operational synergies during implementation. Cost savings from plant consolidation and centralised procurement come only when those integration actions are carried out. The exchange ratio, notices or stamp duty do not explain why planned savings were not achieved.

  1. AFailure to realise operational synergies during implementationCorrect
  2. BOverstatement of the exchange ratio
  3. CNon-compliance with the merger notice requirement
  4. DExcess payment of stamp duty

Explanation

Savings from consolidating plants and centralised procurement are operational synergies. They arise only if implementation actions are executed. The shortfall stems from poor execution, not from the exchange ratio, notice or stamp duty issues, which do not explain unrealised cost savings.

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