Measuring financial synergies in cross-border M&A transactions using diffusion processes

Brailsford, T. J., Liao, S. and Penm, J. (2007) Measuring financial synergies in cross-border M&A transactions using diffusion processes. International Journal of Services Technology and Management, 8 4/5: 276-292. doi:10.1504/IJSTM.2007.013920


Author Brailsford, T. J.
Liao, S.
Penm, J.
Title Measuring financial synergies in cross-border M&A transactions using diffusion processes
Journal name International Journal of Services Technology and Management   Check publisher's open access policy
ISSN 1460-6720
Publication date 2007
Year available 2007
Sub-type Article (original research)
DOI 10.1504/IJSTM.2007.013920
Volume 8
Issue 4/5
Start page 276
End page 292
Total pages 17
Editor Dorgham, M. A.
Terrell, R. D. (Guest Editor)
Place of publication Geneva, Switzerland
Publisher Inderscience Publishers
Collection year 2008
Language eng
Subject C1
350302 Financial Econometrics
710401 Finance and investment services
Abstract In a cross-border M&A framework, the question and measurement of financial synergy can be important in the analysis of the transaction and consideration needs to be given to whether the specific cross-border financial risks outweigh operational synergies. This paper develops a diffusion model to explore a set of optimal capital structures of the acquiring firm, target firm and merged firm. Differential taxes, bankruptcy costs, interest rate risk and foreign exchange risk are considerations of the model. The model results in a measure of pure financial synergy. Further, capital structure can impact on the structure of the offer and the model allows for the determination of an optimal stock exchange ratio. Worked examples reveal that the cross-border M&A of two symmetric firms can result in negative financial synergy, whereas the merger of two asymmetric firms can lead to positive financial synergy.
Keyword cross-border M&A
financial synergies
mergers and acquisitions
stock exchange ratio
capital structure
diffusion processes
Q-Index Code C1
Q-Index Status Confirmed Code

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2008 Higher Education Research Data Collection
 
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Created: Fri, 11 Apr 2008, 11:32:54 EST by Karen Morgan on behalf of UQ Business School