Review of major theoretical and empirical studies on M&A synergy

Abstract

Ivan Ivanovich Rodionov - National Research University "Higher School of Economics."

Email: irodionov@hse.ru

Vitaliy Borisovich Mikhalchuk - National Research University "Higher School of Economics".

Email: vitalmix@gmail.com

Companies from emerging markets, such as China, India, Malaysia, Russia and South Africa, use mergers and acquisitions (M&A) as one of the main instruments to grow and enter global markets. After the global financial crisis in 2008, companies from emerging markets initiated over 25% of M&A deals volume between developed and emerging markets companies.M&A decisions are vital for long-term development of emerging market companies. Recent empirical research shows that companies from developed and emerging markets have different motives and seek different types of synergy in M&A deals.Companies from United States and Europe usually look for economies of scale. On developed, low-growth markets one reliable way to higher profits is to reduce costs with economies of scale. Companies from emerging markets look for market competences that they are lacking: technologies, brands, business-models or skilled employees. Therefore, there is a need to identify determinants of synergy creation in M&A deals initiated by emerging markets companies.This article aims to systematize existing literature about synergy and validate theoretical model suitable for synergy valuation and regression analysis of M&A deal in Russia. We review academic research on M&A synergy, identify major factors of synergy creation and methods of synergy valuation in emerging markets, analyze differences in major factors of synergy creation for developed and emerging markets.