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Displaying risk in mergers: a diagrammatic approach for exchange ratio determination

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  • Alessandra Mainini
  • Enrico Moretto
  • Daniela Visetti

Abstract

This article extends, in a stochastic setting, previous results in the determination of feasible exchange ratios for merging companies. A first outcome is that shareholders of the companies involved in the merging process face both an upper and a lower bounds for acceptable exchange ratios. Secondly, in order for the improved `bargaining region' to be intelligibly displayed, the diagrammatic approach developed by Kulpa is exploited.

Suggested Citation

  • Alessandra Mainini & Enrico Moretto & Daniela Visetti, 2024. "Displaying risk in mergers: a diagrammatic approach for exchange ratio determination," Papers 2401.02681, arXiv.org.
    • Handle: RePEc:arx:papers:2401.02681
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    References listed on IDEAS

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    1. repec:eme:mfppss:v:34:y:2008:i:4:p:221-238 is not listed on IDEAS
    2. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    3. Yagil, Joseph, 1987. "An Exchange Ratio Determination Model for Mergers: A Note," The Financial Review, Eastern Finance Association, vol. 22(1), pages 195-202, February.
    4. Hayne E. Leland, 2007. "Financial Synergies and the Optimal Scope of the Firm: Implications for Mergers, Spinoffs, and Structured Finance," Journal of Finance, American Finance Association, vol. 62(2), pages 765-807, April.
    5. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, December.
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