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

In: Probability and Statistical Models in Operations Research, Computer and Management Sciences

Author

Listed:
  • Kimitoshi Sato

    (Kanagawa University)

  • Kyoko Yagi

    (Tokyo Metropolitan University)

  • Katsushige Sawaki

    (Former Professor of Aoyama Gakuin University)

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.

Suggested Citation

  • Kimitoshi Sato & Kyoko Yagi & Katsushige Sawaki, 2024. "An Analytical Model of the Value of Mergers and Acquisitions Employing Profit Flows with Synergies," Springer Series in Reliability Engineering, in: Syouji Nakamura & Katsushige Sawaki & Toshio Nakagawa (ed.), Probability and Statistical Models in Operations Research, Computer and Management Sciences, pages 55-79, Springer.
    • Handle: RePEc:spr:ssrchp:978-3-031-64597-6_4
    DOI: 10.1007/978-3-031-64597-6_4
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