Quantifying synergy value in mergers and acquisitions

• Main Author: De Graaf, Albert
• Other Authors: Pienaar, A. J.
• Format: Others
• Language: en
• Published: 2011
• Subjects: Synergy; Best practices; Quantifying value; Innovative activity; Intrinsic value; Monte Carlo simulation; Mergers and acquisitions; 658.162; Corporations > Valuations; Consolidation and merger of corporations
• Online Access: De Graaf, Albert (2010) Quantifying synergy value in mergers and acquisitions, University of South Africa, Pretoria, <http://hdl.handle.net/10500/3965>; http://hdl.handle.net/10500/3965

Mergers and acquisitions have been demonstrated to create synergies, but not in all cases. Current research reveals that where synergies exist, these seem to accrue to the shareholders of the selling companies. Given the limitations of our qualitative research design, we find that it is important to quantify synergy before the acquisition, preferably by applying certain best practices. In an attempt to enhance understanding of the phenomenon, we find that several types of synergy exist and that their origins include efficiencies, such as economies of scale and economies in innovative activity. We further find that the bid price is an important indicator of success and that its maximum should not exceed the intrinsic value of the target, plus the value of synergies between the bidder and target. We further find that best practices exist in quantifying cost and revenue synergies and describe these separately per origin. === Management Accounting === M.Com. (Accounting)