Faculty of Economics and Business Administration Publications Database

Identifying synergies ahead of mergers and acquisitions

zu Knyphausen-Aufseß, Dodo
Köppen, Jens
Volume: 2
Number: 4
Pages: 344 - 360
Month: December
ISSN-Print: 1460-6712
Link External Source: Online Version
Year: 2007
Keywords: Acquisition premium; Mergers; Acquisitions; Synergies
Abstract: Most merger and acquisition activities destroy value. One reason for this is that acquisition premiums tend to be too high in relation to the synergies that motivated the premiums paid. In this paper, we illustrate the performance implications of overstated synergies and develop a ten-step reference model for the calculation of synergies in order to avoid overestimating their potential. After that, we present three case studies in which we assess how synergies are determined in practice and compare this to our reference model.