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

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Listed:
  • 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," Working Papers 529, University of Milano-Bicocca, Department of Economics.
    • Handle: RePEc:mib:wpaper:529
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    References listed on IDEAS

    as
    1. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, December.
    2. repec:eme:mfppss:v:34:y:2008:i:4:p:221-238 is not listed on IDEAS
    3. 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.
    4. 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.
    5. 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.
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    More about this item

    Keywords

    Mergers and acquisitions; exchange ratio determination; synergy; risk-adjusted performance; diagrammatic representation;
    All these keywords.

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