Synergy Disclosures in Mergers and Acquisitions

46 Pages Posted: 17 Mar 2010 Last revised: 7 May 2013

See all articles by Marie Dutordoir

Marie Dutordoir

University of Manchester - Manchester Business School

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Manuel Vasconcelos

Cornerstone Research - New York Office

Date Written: May 6, 2013

Abstract

We examine bidding firms’ motives for disclosing a synergy forecast when announcing a merger or acquisition. Our sample consists of 1,990 M&A deals, of which 345 announce synergy estimates. Our results suggest that synergy disclosures serve to obtain a more favorable market reception for deals that would otherwise induce highly negative bidder announcement returns. After controlling for the endogeneity of the disclosure decision, synergy forecast disclosures result in approximately 5% higher bidder stock returns. The main deterrents of disclosing synergy values are lack of precise information on synergy values available to bidding-firm management, and shareholder litigation risk.

Keywords: Mergers and Acquisitions, Synergies, Voluntary disclosure, Information asymmetry

JEL Classification: G34, M41

Suggested Citation

Dutordoir, Marie and Roosenboom, Peter and Vasconcelos, Manuel, Synergy Disclosures in Mergers and Acquisitions (May 6, 2013). Available at SSRN: https://ssrn.com/abstract=1571546 or http://dx.doi.org/10.2139/ssrn.1571546

Marie Dutordoir

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Manuel Vasconcelos (Contact Author)

Cornerstone Research - New York Office ( email )

1919 Pennsylvania Avenue
Suite 600
Washington, DC 20006
United States

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