Do Merger-Related Operating Synergies Exist?

48 Pages Posted: 2 Jan 2005 Last revised: 12 Nov 2013

See all articles by Gennaro (帅纳) Bernile

Gennaro (帅纳) Bernile

University of Miami - Department of Finance

Scott W. Bauguess

University of Texas at Austin - Department of Finance

Date Written: July 2011

Abstract

Executives frequently forecast large operating efficiency gains from mergers. Using these projections, we study the impact of operating synergies on merger performance. Investors' reaction to mergers varies directly with the availability of these forecasts and the gains they imply, and post-merger operating performance increases with the predictable component of forecasted synergies based on deal characteristics. The realized improvements, however, do not depend on the availability of forecasts or the surprise they convey, and post-merger stock returns reconcile discrepancies between investors' ex ante beliefs and mergers' ex post performance related to management forecasts. Overall, the evidence supports the neoclassical view that expectations and realizations of synergistic gains are important determinants of merger activity and performance.

Keywords: Mergers and Acquisitions, Synergies, Management Forecasts, Merger Performance

JEL Classification: G14, G17, G34

Suggested Citation

Bernile, Gennaro (帅纳) and Bauguess, Scott W., Do Merger-Related Operating Synergies Exist? (July 2011). Available at SSRN: https://ssrn.com/abstract=642322 or http://dx.doi.org/10.2139/ssrn.642322

Gennaro (帅纳) Bernile (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Scott W. Bauguess

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,150
Abstract Views
3,995
rank
19,865
PlumX Metrics