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The Estimation of M&A Synergies: A New Approach
Author(s) -
Pereiro Luis E.
Publication year - 2018
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22364
Subject(s) - odds , estimation , computer science , value (mathematics) , econometrics , gauge (firearms) , machine learning , industrial engineering , economics , engineering , logistic regression , management , geography , archaeology
Merger and acquisition synergies are not a black box: they can be deconstructed, triangulated, and simulated to assess the odds that an acquirer is about to overpay for a target. We discuss three classic techniques of synergy estimation and introduce a novel one: incremental economic value added—the only method that can accurately gauge by how much a specific bidder can improve the performance of a prospective target. We illustrate how to combine the four techniques via simulation by examining AmerisourceBergen's bid in 2014 to acquire Profarma, a Brazilian drug wholesaler. © 2019 Wiley Periodicals, Inc.