Publication Type
Working Paper
Version
publishedVersion
Publication Date
7-2011
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
Discipline
Corporate Finance | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
47
Identifier
10.2139/ssrn.642322
Publisher
SSRN
Citation
BERNILE, Gennaro and BAUGUESS, Scott W..
Do merger-related operating synergies exist?. (2011). 1-47.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5162
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.642322