The Construction of Financial Value: Crafting Synergy Estimates in Acquisitions

Luc Paugam, Yike Wang, Hervé Stolowy and Christof Binder
Additional contact information
Luc Paugam: HEC Paris - Ecole des Hautes Etudes Commerciales
Yike Wang: HEC Paris - Ecole des Hautes Etudes Commerciales
Hervé Stolowy: HEC Paris - Ecole des Hautes Etudes Commerciales
Christof Binder: TUB - Technical University of Berlin / Technische Universität Berlin

Working Papers from HAL

Abstract: Synergies between two firms often serve as the economic rationale supporting mergers and acquisitions. We investigate whether synergy estimates reflect the performance improvement of the transactions or if, alternatively, these estimates are a façade instrumental to the acquisition narrative to provide an economic argument for acquisitions. We investigate this question with mixed methods. First, we analyze a sample of significant transactions involving 404 international acquirers of public targets disclosing synergy cost estimates. We test the extent to which these synergy estimates are associated with several ex-post performance measures. Our findings reveal a negative association between synergy estimates and multiple post-deal operating performance measures relative to the pre-deal average. Instead, we find that synergy estimates are positively correlated with the offer price premium, goodwill, and future goodwill impairment, indicating that firms disclosing higher synergy estimates are more likely to overpay for their targets. Second, drawing on ten interviews with valuation specialists, investment bankers, strategy consultants, and a CFO, with deep knowledge in acquisitions and synergy estimation, we find that synergy estimates are often constructed to ensure completion of transactions, which explains why they tend to be disconnected from post-acquisition performance improvement. Overall, our paper contributes to the literature on the social construction of numbers, as exemplified by synergy estimates.

Keywords: M&A; Social Construction of Numbers; Synergy Estimates; Voluntary Disclosure (search for similar items in EconPapers)
Date: 2026-01-29
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05562625

DOI: 10.2139/ssrn.6149046

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().