Synergy Disclosures in Mergers and Acquisitions

Marie Dutordoir, Peter Roosenboom, Manuel Vasconcelos
2010 Social Science Research Network  
We examine the motivations for bidding-firm managers to disclose a forecasted synergy value along with the deal announcement. Our findings suggest that synergy disclosure decisions result from a trade-off between bidder management's need to signal the quality of the deal to its shareholders and the costs associated with providing inaccurate synergy estimates. Agency costs, antitrust regulations, proprietary costs, and the need to obtain shareholder approval are of secondary importance. After
more » ... mportance. After controlling for the endogeneity of the disclosure decision, synergy disclosures have a significant positive influence on acquirer announcement returns. This result suggests that synergy forecasts are an effective signaling mechanism to bridge the information gap between acquirer managers and shareholders.
doi:10.2139/ssrn.1571546 fatcat:jfiddjhyfzardpdtacglowhaby