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Mergers, Acquisitions and Takeovers Case Study

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Case Title:

Merger Synergies: How Good to be True?

Publication Year : 2005

Authors: Mercy Mathew & Srinath Manda

Industry: General Business

Region:Global

Case Code: MAA0028

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
A study by McKinsey & Co showed that 70% of mergers fall short in achieving their revenue synergy targets and almost 40% face cost synergy disappointments. Occasionally deals end up in dis-synergy. The rationale that two companies together add more value than two separate companies is often negated because of synergy miscalculations.

Pedagogical Objectives:

  • To discuss the risk of synergy miscalculations
  • To discuss whether revenue synergy or cost synergy should be benchmarked to rate the success of the merger.

Keywords : Pre-merger estimates, Post-merger estimates, Mergers and acquisitions, Consumer goods industry, Finance Case Study, Revenue synergies, Dis-synergy deals, Cost synergies, Synergy miscalculations, Overestimated synergy, Strategic fit, Synergy disappointment, Executive failures, Cross-cultural competence, Integration costs, Cost savings and efficiencies

Contents : 
Synergy Estimates
Acknowledging Synergy Setbacks
Revenue Synergy Estimation Error
Cost Synergy Estimation Error
Mergers: Establishing a Bid Price

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