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Motives of M&A and Deal Synergies

  • Vinod Kumar
  • Priti Sharma
Chapter

Abstract

This chapter describes various theories of M&A. Insights have been provided into value creation, value-neutral, and value reduction theories of M&A. The rationale behind a company entering into a merger or acquisition deal is discussed extensively stating the benefit anticipated as synergy. A merger is said to give rise to synergy when the value of combined entity is larger than the sum of value of individual organizations. Synergy can arise from various sources like economies of scale, economies of scope, pricing power, etc. Deal synergy can be evaluated by using discounting benefits method or by subtracting the sum of value of combined entity from the value of combined entity.

Keywords

Theories of M&A Value-enhancing theories Value-neutral theories Value-destroying theories Synergy Economies of scale Motives of merger Forms of synergy 

Copyright information

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  • Vinod Kumar
    • 1
  • Priti Sharma
    • 2
  1. 1.SGND Khalsa CollegeUniversity of DelhiNew DelhiIndia
  2. 2.Institute of Management Technology, Centre for Distance LearningGhaziabadIndia

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