Quantifying synergy value in mergers and acquisitions

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 shareholdersof the selling companies. Given the limitations of our qualitative research design, we find that itis important to quantify synergy before the acquisition, preferably by applying certain bestpractices. In an attempt to enhance understanding of the phenomenon, we find that severaltypes of synergy exist and that their origins include efficiencies, such as economies of scaleand economies in innovative activity. We further find that the bid price is an important indicatorof success and that its maximum should not exceed the intrinsic value of the target, plus thevalue of synergies between the bidder and target. We further find that best practices exist inquantifying cost and revenue synergies and describe these separately per origin.