Practical Aspects of Assessment of the Synergistic Effect of Mergers & Acquisitions of Companies

Kostyantyn Afanasyev () and Iryna Hanechko ()
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Kostyantyn Afanasyev: Kyiv National University of Trade and Economics
Iryna Hanechko: Kyiv National University of Trade and Economics

Oblik i finansi, 2014, issue 3, 85-89

Abstract: To make decisions regarding the advisability of agreements on mergers and acquisitions (M&A) it is necessary to assess synergistic effect. The paper emphasis on the important issues of practical application of evaluation methods, which are often left unconsidered by the appraisers. Indicated is the necessity of research of duration of the synergistic effect and the rate of its growth, as well as consideration of the terminal value, which is expected in post-forecast period. It is determined that the methods of the income approach are the most appropriate for calculating the cost of a synergistic effect with different versions of the integrated business. Provided are recommendations on the use of different discount rates when estimating future cash flows generated by different types of synergistic effects. The article features an example of assessing synergistic effect due to spending cuts after the M&A transaction, calculation of indicators of effectiveness of the transaction. Founded is the expediency of the use of aggregated and non-aggregated approaches in assessing the synergy. The results of research can solve some problems in the evaluation of synergistic effects.

Keywords: synergistic effect; evaluation; mergers; acquisitions; M&A; income approach (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2014
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