Avoiding the "Synergy Trap": Practical Guidance on M&A Decisions for CEOs and Boards

When a major acquisition is announced, investors try to understand where the value is going to come from and whether the acquirer has a plan to achieve that value. Deals are often brought to market with one big synergy number and a statement that the deal will be "accretive" to earnings. The problem, however, is that investors can't understand or track one number. Going to market with just one number also suggests that the acquirer has no credible plan, which in turn gives investors more reason to sell shares than to buy, particularly when a significant premium is being offered. 2006 Morgan Stanley.