A synergy measurement model to support the pre-deal decision making in mergers and acquisitions

Abstract

Purpose

The purpose of this paper is to develop an effective synergy measurement model to support the decision-making process in mergers and acquisitions (M&A).

Design/methodology/approach

Relevant literature is reviewed and critically assessed. An interpretive methodology is used to analyse empirical data from a questionnaire survey and interviews of M&A experts. A framework is provided with the objective to support the process of synergy measurement and the success of pre-deal planning.

Findings

The authors find several mismatches in synergy measurement practices. The strategic factors, which are considered very relevant to generating reliable forecasts, are surprisingly not adequately quantified. On the contrary, a synergy measurement model may integrate the assessment of these factors: the type of synergy, the size of synergy, the timing of synergy and the likelihood of achievement.

Practical implications

The paper offers interesting implications for firms, advisors and consultants, pointing out that synergy measurement issues are related to the analysis of strategic factors affecting synergy. These findings suggest that the pre-planning process should integrate people and tools from different backgrounds, from strategy to accounting, to effectively measure the synergy value. The authors also suggest the development of new tools in response to the needs of practitioners for best practices in M&A.

Originality/value

This paper highlights that the effective use of synergy measurement models are critical to improve the success of M&A due diligence.

Citation

Garzella, S. and Fiorentino, R. (2014), "A synergy measurement model to support the pre-deal decision making in mergers and acquisitions", Management Decision, Vol. 52 No. 6, pp. 1194-1216. https://doi.org/10.1108/MD-10-2013-0516