An Analytical Model of the Value of Mergers and Acquisitions Employing Profit Flows with Synergies

Kimitoshi Sato (), Kyoko Yagi () and Katsushige Sawaki
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Kimitoshi Sato: Kanagawa University
Kyoko Yagi: Tokyo Metropolitan University
Katsushige Sawaki: Former Professor of Aoyama Gakuin University

A chapter in Probability and Statistical Models in Operations Research, Computer and Management Sciences, 2024, pp 55-79 from Springer

Abstract: Abstract This paper presents a framework for valuing mergers and acquisitions by explicitly incorporating synergies and risk diversification based upon the real options approach. We examine the impact of stochastic profit flows on the timing and terms of mergers in the context of the synergy of the mergers. The paper also explores the analytical properties of the region where the merger is optimal. Numerical examples demonstrate how much more or less a mergers is likely to take place as parameters change.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:ssrchp:978-3-031-64597-6_4

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DOI: 10.1007/978-3-031-64597-6_4

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