Measuring the M&A Value of Control and Synergy in Central and Eastern European Transition Economies with the Case of Avast -AVG Acquisition

Moreira, David and Janda, Karel (2017): Measuring the M&A Value of Control and Synergy in Central and Eastern European Transition Economies with the Case of Avast -AVG Acquisition.

Abstract

We examine the valuation of synergies and control in mergers and acquisitions (M&A) in Central and Eastern European (CEE) transition economies. We determine this value based on comprehensive contemporaneous financial findings extracted from the Thomson Reuters database. Worldwide the market of mergers and acquisitions (M&A) is increasing, reaching in 2016 a value of 6.000 billion EUR globally. Among the CEE transition economies, the M&A total value in the same period was 50 billion EUR. It is widely accepted that between 60% and 80% of M&As are unsuccessful in value creation, so we further research evidences about an alternative framework to value the M&A also qualitatively. We develop a valuation model for prediction of the value of control and synergy in M&A deals. We suggest further directions for analysis in the field of M&A value creation, and recommend an alternative to the most used earning per share metric to enhance the predictability and transparency of valuation worldwide.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mergers, Acquisitions, Synergy, Control, Corporate Governance
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P23 - Factor and Product Markets ; Industry Studies ; Population

References

Andrade, 2001: New Evidence and Perspectives on Mergers, Journal of Economic Perspectives, 15(2), 103-120.

Baldwin, 1990: Mergers Placed in the Context of Firm Turnover, in Bureau of the Census: 1990 Annual Research Conference Proceedings, Washington, DC: US Department of Commerce, 53-73.

Bhide, 1989: The Causes and Consequences of Hostile Takeovers, Journal of Applied Corporate Finance, v2, 36-59.

Bradley, 1983: The Rationale behind Interfirm Tender Offers, Journal of Financial Economics, Vol 11, 183-206.

Bradley, Desai, 1988:Synergistic Gains from Corporate Acquisitions and their Division between the Stockholders of Target and Acquiring Firms, Journal of Financial Economics, Vol 21, 3-40.

Cartwright, Cooper, 1992: Mergers and Acquisitions: The Human Factor, Oxford.

DeAngelo, Rice, 1983: Antitakeover Charter Amendments and Stockholder Wealth, Journal of Financial Economics, Vol 11, 329-360.

Farrell, Shapiro, 2001: Scale Economies and Synergies in Horizontal Merger Analysis, Antitrust Law Journal, 685-711.

Healy, Palepu, Ruback, 1992: Does Corporate Performance improve after Mergers? Journal of Financial Economics, vol 31, 135-175.

Hong, Kaplan, Mandelker. 1978: Pooling Vs. Purchase: The Effects Of Accounting For Mergers On Stock Prices, The Accounting Review, 1978, vol 53(1), 31-47.

Jensen, Ruback, 1983: The Market for Corporate Control, Journal of Financial Economics, Vol 11, 275-300.

Kaplan, Weisbach, 1992: The Success of Acquisitions: The Evidence from Divestitures, Journal of Finance, v47, 107-138.

Linn, McConnell, 1983: An Empirical Investigation of the Impact of Anti-Takeover Amendments on Common Stock Prices, Journal of Financial Economics, Vol 11, 361-399.

Meeks, 1977: Disappointing Marriage: A Study of the Gains from Merger, Cambridge

Tichy, 2001: What Do We Know About Success and Failure of Mergers? Journal of Industry, Competition and Trade, 1(4), 347-394