Synergy in Mergers and Acquisitions: Typology, Lifecycles, and Value

Forthcoming, Academy of Management Review

109 Pages Posted: 10 Apr 2021

See all articles by Emilie Feldman

Emilie Feldman

University of Pennsylvania - The Wharton School

Exequiel Hernandez

University of Pennsylvania - The Wharton School

Date Written: January 28, 2021

Abstract

Value in mergers and acquisitions (M&A) derives from the synergistic combination of an acquirer and a target. We advance the existing conceptualization of synergies in three ways. First, we develop a theoretically-motivated, parsimonious typology of five distinct sources of synergy based on two underlying dimensions: the level of analysis at which valuable activities occur and the orientation by which those activities are governed. The typology uncovers three novel synergy sources (relational, network, and non-market) arising from acquisition-induced changes in firms’ external cooperative environments, and classifies two other well-known synergies (internal and market power). Second, we introduce the concept of synergy lifecycles to explore how the timing of initial realization and the duration of gains vary across the five synergies, based on differences in the post-merger integration required and in the control the acquirer has over the assets and activities combined by the merger. Third, we consider how the synergy types interact, yielding co-synergies when they complement each other and dis-synergies when they substitute for one other. This enables us to expand the traditional conceptualization of the total value created by M&A as the sum of each of the synergy types, their co-synergies, and their dis-synergies.

Keywords: mergers and acquisitions, synergy typology, synergy lifecycle, co-synergy, dis-synergy, post-merger integration, value, corporate strategy

Suggested Citation

Feldman, Emilie and Hernandez, Exequiel, Synergy in Mergers and Acquisitions: Typology, Lifecycles, and Value (January 28, 2021). Forthcoming, Academy of Management Review, Available at SSRN: https://ssrn.com/abstract=3816956 or http://dx.doi.org/10.2139/ssrn.3816956

Emilie Feldman

University of Pennsylvania - The Wharton School ( email )

3733 Spruce Street
Philadelphia, PA 19104-6374
United States

Exequiel Hernandez (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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