PREDICTION OF SYNERGIES IN MERGERS

• Authors: Režňáková Mária , Pěta Jan , Karas Michal
• Languages of publication: EN

Abstracts

EN

In this paper we present a method of calculating the value of synergy resulting from mergers between private companies as well as a model for the prediction of potential synergy values in contemplated mergers (M&A deals). We first examined the process of determining the value of a synergy. Since we analysed mergers involving private mechanical engineering companies, we used the discounted capital cash flow method for the determination of the synergy value. We divided the selected mergers according to the achieved synergy value into two groups, i.e. into successful mergers and failed mergers. We then analysed the two groups in order to identify financial ratios with statistically significant differences (deviations). We then used those ratios to establish a rule for the differentiation between mergers that would increase in business value, i.e. with positive synergy, and those whose value would decrease. A decision rule was developed using the classification and regression trees method. In the research sample, the developed model distinguished successful merger from failed ones with 92% accuracy.

Keywords

EN

MERGERS; MECHANICAL ENGINEERING; OPERATING SYNERGIES; CAPITAL CASH FLOW; CLASSIFICATION AND REGRESSION TREES

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2020
• Volume: 68
• Issue: 2
• Pages: 168 – 187

Contributors

author

Režňáková Mária

• Brno University of Technology, Faculty of Business and Management, Kolejní 2906/4, 612 00 Brno, Czech Republic

author

Pěta Jan

author

Karas Michal