TY - JOUR

T1 - Valuing synergies in strategic mergers and acquisitions using the real options approach

AU - Лукьянова, Анна Евгеньевна

AU - Никулин, Егор Дмитриевич

AU - Ведерников, Андрей

N1 - Loukianova, A. E. Valuing synergies in strategic mergers and acquisitions using the real options approach / A. E. Loukianova, E. D. Nikulin, A. Vedernikov // Investment Management and Financial Innovations. - 2017. - Volume 14, Issue 1. - P. 236-247.

PY - 2017

Y1 - 2017

N2 - The purpose of the current paper is to elaborate the model for assessing cumulative synergetic effect in M&A (Mergers and Acquisitions) deals on the basis of a real options approach. The majority of papers on the synergetic effects of M&A deals typically focus on a particular type of synergy, while the current paper proposes a model that accounts for the cumulative simultaneous effect of different types of operating and financial synergies. The methodology of our research is loosely based on Datar-Mathews real option valuation model, which is flexible and intuitive for practitioners. Formulae for assessing eight types of synergy typically arising from M&A deals are developed. They are integrated into a single model to assess their cumulative effect on the M&A deal using a simulation modelling approach. The method was used ex post to find synergy values in two recent M&A deals in the pharmaceutical industry, and produced sound results. The proposed approach to value target companies could be used by firms before an M&A deal in the due diligence process. Using this tool a company can build a bidding strategy and define the maximum premium it can pay for the target.

AB - The purpose of the current paper is to elaborate the model for assessing cumulative synergetic effect in M&A (Mergers and Acquisitions) deals on the basis of a real options approach. The majority of papers on the synergetic effects of M&A deals typically focus on a particular type of synergy, while the current paper proposes a model that accounts for the cumulative simultaneous effect of different types of operating and financial synergies. The methodology of our research is loosely based on Datar-Mathews real option valuation model, which is flexible and intuitive for practitioners. Formulae for assessing eight types of synergy typically arising from M&A deals are developed. They are integrated into a single model to assess their cumulative effect on the M&A deal using a simulation modelling approach. The method was used ex post to find synergy values in two recent M&A deals in the pharmaceutical industry, and produced sound results. The proposed approach to value target companies could be used by firms before an M&A deal in the due diligence process. Using this tool a company can build a bidding strategy and define the maximum premium it can pay for the target.

KW - mergers

KW - acquisitions

KW - synergy

KW - real options

KW - SCOPUS

KW - РОССИЙСКИЙ ИНДЕКС НАУЧНОГО ЦИТИРОВАНИЯ

KW - SCOPUS

KW - РОССИЙСКИЙ ИНДЕКС НАУЧНОГО ЦИТИРОВАНИЯ

U2 - 10.21511/imfi.14(1-1).2017.10

DO - 10.21511/imfi.14(1-1).2017.10

M3 - Article

VL - 14

SP - 236

EP - 247

JO - Investment Management and Financial Innovations

JF - Investment Management and Financial Innovations

SN - 1810-4967

IS - 1 (continuation)

ER -