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Synergy disclosures in mergers and acquisitions

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  • Dutordoir, Marie
  • Roosenboom, Peter
  • Vasconcelos, Manuel

Abstract

We examine bidding firms' motives for disclosing a synergy forecast when announcing a merger or acquisition. Our sample consists of 1990 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. Bidders do not seem to use synergy disclosures to strategically influence takeover premiums or competition for the target.

Suggested Citation

  • Dutordoir, Marie & Roosenboom, Peter & Vasconcelos, Manuel, 2014. "Synergy disclosures in mergers and acquisitions," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 88-100.
  • Handle: RePEc:eee:finana:v:31:y:2014:i:c:p:88-100
    DOI: 10.1016/j.irfa.2013.09.005
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    1. repec:eee:quaeco:v:65:y:2017:i:c:p:240-248 is not listed on IDEAS
    2. repec:eee:finana:v:54:y:2017:i:c:p:144-158 is not listed on IDEAS
    3. Mittal, Amit & Garg, Ajay Kumar, 2017. "Private information implications for acquirers and targets in horizontal mergers," MPRA Paper 85355, University Library of Munich, Germany.
    4. Mittal, Amit & Garg, Ajay Kumar, 2017. "Why do acquirers prefer M&A? Evidence from Banks in India," MPRA Paper 85354, University Library of Munich, Germany.
    5. Khurshid Ali & Zeeshan Khan & Numan Khan & Abdul-Hamid Ibrahim Alsubaie & Fazal Subhan & Moumen Kanadil, 2016. "Performance Evaluation of UK Acquiring Companies in the Pre and Post-Acquisitions Periods," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 3(2), pages 130-138.

    More about this item

    Keywords

    Mergers and acquisitions; Synergies; Voluntary disclosure; Information asymmetry;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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