Caspian Journal of Applied Sciences Research, 1(12), pp.

25-38, 2012
Available online at http://www.cjasr.com
ISSN: 2251-9114, 2012 CJASR
25

Full Length Research Paper

From Strategic Fit to Synergy Evaluation in M&A Deals

Arabella Mocciaro Li Destri, Pasquale Massimo Picone*, Anna Min

University of Palermo University of Catania University of Catania, Italy
*Corresponding Author: pmpicone@gmail.com

Received 15 September 2012; Accepted 18 October 2012

The aim of this paper is to grasp the processes underlying the genesis and assessment of synergies in M&A deals.
We proceed to an in-depth scrutiny of the foundations of synergies using Porters model of the value chain. A
discernment of the nature of synergies and the mode of their emergence is helpful to clarify to what extent and
under which boundary conditions it is appropriate to apply the DCF or the real option techniques for evaluating
each type of synergy. Combining both financial tools, the methodology suggested for evaluating the synergies is
able to: evaluate projects of M&As, orient the selection of target firms and the definition of the premium of
acquisition, and drive the integration processes.

Key words: merger, acquisition, synergy, Porters value chain, evaluation.

1. INTRODUCTION

In recent decades, M&A research in managerial
literature and corporate finance studies has
developed rapidly. These advances include a
handful of ideas about the nature, antecedents, and
economic and financial impact of business
combinations (Meglio and Capasso, 2012).
However, the debate about the shareholder value
creation of businesses combinations has resulted in
partial and inconsistent conclusions (Haleblian et
al., 2009). Mapping the main studies,
institutionalized streams, and dominant theoretical
explanations, Ismail et al. (2011) concluded that
research on the effect of M&A on abnormal returns
for both acquiring and acquired firms is
inconclusive (Tse and Soufani, 2001; Andre, Kooli
and LHer, 2004; Choi and Russell, 2004;
Megginson et al., 2004; Yook, 2004); similarly,
studies that use accounting-based measures show
contradictory positions (Ghosh, 2002; Heron and
Lie, 2002; Ramaswamy and Waegelein, 2003). In
addition, King et al. (2004) indicated that
unidentified variables may explain the significant
variance in post-acquisition performance.
Moreover et al. (2008) found a path linking
integration process performance to long-term firm
results via synergy achievement.
In approaching the topic of M&A performance,
Sirower (1997) argued that the key to
understanding the dynamics underlying the
performance of M&A is the comparison between
the amount of premium of acquisition (that is
negotiated between the parties) and the value of
synergies that a business combination generates.
The choice to acquire a firm or merge with
another firm should result from a well-developed
corporate strategy (Payne, 1987). Conversely, the
lack of understanding of the nature and sources of
synergies and their appropriate evaluation results
in exceeding the reservation price and leads to the
synergy trap (Sirower, 1997) i.e., a downward
spiral that involves the progressive and incremental
destruction of wealth. More in detail, the
mechanisms underlying the synergy trap are (a)
the improper transfer of resources from
stockholders of the acquiring firm to shareholders
of the target, (b) increase in risk-seeking behavior
and baring-risk by management and the pressure to
recover from poor performance following the
completion of the transaction, and (c) the negative
effects and costs associated with drainage of
financial resources that are vital to supporting the
initial integration processes and operational
strategic business combinations.
Taking into account that the acquisition
premium plays a key role in M&A performance
(Sirower, 1997; Krishnan et al., 2007), and
continuous need of practitioners to obtain results
that can be helpful to manage M&A processes
(Very, 2011), the object of this paper is to discern
the main variables that are instrumental in creating
or destroying value in M&A deals in the process of
synergy evaluation. First, we examine the
procedural aspects - operational, functional,
organizational, and strategic - that are the basis of
Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
26
value creation in M&A deals. Successively, we
categorize the various sources of synergy and how
best to evaluate each of them. Therefore, we
develop a methodology to assess the synergy value
that is the result of a path of research that lies at the
intersection of strategic management and corporate
finance. We address the need to integrate valuation
tools from corporate finance and principles from
the fields of strategic management to better
understand value creation in financial markets
(Smit and Trigeorgis, 2004; Sirower and Sahni,
2006).
This paper is organized as follows. Section two
aims to clarify the concept of synergy. In section
three, using Porters value chain as a conceptual
support, we conduct a detailed investigation of the
sources of synergies in the operations of M&A. In
section four, we classify the various sources of
synergies previously identified on the basis of the
degree of predictability. We then discuss the
scheme guide in the choice of valuation techniques
for each class of synergies. In section five, we
present synthetic formulas for evaluating synergies
in M&A. Section six offers conclusions,
underscoring the problem of the appropriation of
synergy value.

2. CONCEPTUAL DEVELOPMENT

The term synergy comes from the Greek word
synerga or synrgeia; in turn, this word is derived
from synergo. From an etymological perspective,
the roots of the word synergy are syn (with,
together) and ergo (act). Synergy concerns the
results of different factors taken together versus a
sum of the factors.
From an etymological point of view, the
concept of synergy possesses a neutral meaning:
the joint effect of two or more factors is different
from their simple sum. Consequently, the synergy
value may be positive, if a combination of factors
improves the effectiveness of actions alone, or
negative, if the result of joint action of two or more
factors is less than their simple sum.
Generally, the justification of M&A operations
is the intention to create positive synergies. It
means that the value of the business combination is
assumed expected to be greater than the value of
the two firms considered independently:
[1]
B A AB
W W W + > ,
[2] S W W W
B A AB
+ + = ,
where W
AB
is the value of business
combination, W
A
and W
B
are respectively the
values of firms A and B, and S is the value of the
synergies emerging from the combination.
However, as already mentioned, the empirical
studies regarding the results of M&A operations
show high variability (Hitt et al., 2001); therefore,
it is also important to consider the possibility that
negative synergies emerge.
[3]
B A AB
W W W + < ,
[4] S W W W
B A AB
+ = .
Only detailed strategic planning and hardnosed
economic assessment of the costs and benefits
entitled by post-acquisition operational processes
can provide the necessary basis for a rational
estimate of the potential synergies entailed by
specific M&A operations. This evaluation,
therefore, entails the integration of perspectives
and techniques from the field of both strategy and
finance. It needs bringing strategy back into
financial systems of measurement (Mocciaro Li
Destri et al., 2012). Essentially, the generation of
synergies is linked with corporate growth,
increased market power, and greater profitability
(Alexandridis et al., 2010). Therefore, the
assessment of synergies implies estimating the
strategic fit (Shelton, 1988), and, successively,
shareholders value creation. Actually, paying a
high acquisition premium is often a measure of
low-quality decision making (Laamanen, 2007).
The breakings down of the acquisition value
and of the synergy value have been analyzed in the
finance literature (Massari, 1998; Zanetti, 2000).
On the basis of Massari and Zanetti's models, the
formulation of a measurement method should
include three types of synergies. The first type,
incremental cash flow synergies (S
F
), concerns the
cash flows that the business combination generates
according to a plan of integration. The second type
of synergies is related to flexibility. The real
options synergies (S
O
) concern how the business
combination increases the firms capability to
respond to the evolution of the competitive
environment. Actually, real options analysis has
progressively emerged as a pivotal methodology to
assess investment opportunities when the
environments are characterized by high levels of
uncertainty (Dixit and Pindyck, 1994). This
synergy, thus, aims to capture the flexibility value
resulting from the firms adaptive capabilities
(Smit and Trigeorgis, 2004). Finally, the third type
of synergies regards the change of the firms risk
profile (S
R
) as a result of the operation of M&A.
Moving from the conceptual break-down of the
notion of synergies in M&A operations, it becomes
apparent those in order to aid managerial
evaluations there is the necessity and classify the
Caspian Journal of Applied Sciences Research, 1(12), pp. 25-38, 2012
27
sources of different classes of synergies and,
further, elaborate specific evaluation techniques for
each class of synergies.
In synthetic terms, the equity value of the
synergies will be calculated as follows:
[5]
R O F
S S S S + + = .
Therefore, the estimated value of a business
combination - assuming the DCF in asset
perspective - ideally consists of the following
elements:
[6]
AB R O F B
B
A
A
AB
D S S S )] D W ( ) D W [( W + + + + = .
Where:
-
A
W e D
A
represent the value of the assets
and the value of debt for the firm A;
-
B
W e D
B
represent the value of the assets
and the value of debt for the firm B;
-
F
S ,
O
S e
R
S indicate the estimated value
of synergies classified as above; and
-
AB
D A Indicates the change in value of
total debt.
Simplistically, we can rewrite the [6]
formula as:
[7] ) D D (D ) S S S ( ) W W ( W
AB B A R O F
B A
AB
+ + + + + + =
.

The formula [7] asks an effort to categorize the
synergies in
F
S ,
O
S e
R
S on the basis of the nature
and the mode to emerge of them.

3. THE GENESIS OF SYNERGIES IN M&A
OPERATIONS

In this section, we identify the various sources of
potential synergies in M&A operations. Using
Porter's model of the value chain (Porter, 1985) as
a conceptual support to investigate the processes of
structural integration between firms, we analyze
the operational and strategic impact of M&A deals.
By following this practice, we aim to give a
twofold contribution. On one hand, we underscore
the integration priorities that should precisely
match the value and type of synergies that drove
the deal in the first place (Ficery et al., 2007). In
this perspective, the aim of the analysis is to find
profit-making opportunities (Bruner, 2004).
Actually, our analysis shows the foundations of
sustained competitive advantages generated by
potential synergies (Gruca, Nath and Mehara,
1997). On the other hand, for each of the identified
sources of synergy, we discuss its nature in order
to support the subsequent of synergy evaluation.




Fig. 1: Conceptual scheme for identifying potential synergies in M&A deals (Payne, 1987)


Firm infrastructure
Technology development
Human Resource Management

Procurement
Service Marketing
& Sales
Outbound
logistics

Operations Inbound
logistics

Margin
Technology development

Firm infrastructure

Human Resource Management

Procurement
Service Marketing
& Sales
Outbound
logistics

Operations Inbound
logistics

Margin
Overall
potential
Potential

Potential

Potential Potential
Potential
Potential


Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
28
3.1. Synergies Generated in the Procurement
and Logistics Functions

The first class of synergies arising from the
functions in question concerns the reduction of
transaction costs generated by the upstream
integration of production of one or more inputs.
The choices of make or buy (Williamson, 1971;
Perry, 1989; Grant, 1996) not only depend on the
cost of buying the goods, but also on the costs of
research and selection of the suppliers, the costs of
negotiating contract terms, the costs of sending
orders, controlling cost, the costs of the receipt of
materials, the cost of controlling the quality of
goods, administrative costs and, the costs of the
settlement of payments.
Moreover, vertical integration can generate
synergies in the supply of technological goods.
Perry (1989) underscored that interdependence
between phases of the supply chain can reduce the
use of some production inputs.
In addition, synergies can be achieved as a
stochastic increasing return in the management of
raw materials. Unit costs of maintenance of raw
materials, namely those generated by retention and
storage of goods (financial charges, insurance
charges, storage charges resulting from the risks,
expenses and charges related to the additional
space handling) are almost identical ex ante and ex
post merger or acquisition. However, the optimal
quantities of raw materials stored in warehouses to
minimize the risk of running out of stock cost, in
the case of homogeneity of raw materials between
firms, it can be reduced for the effect of stochastic
increasing returns (law of large number).
The last type of potential synergies related to
procurement stem from the increase in bargaining
power with suppliers. Often, the business
combination reduces the number of buyers, raises
the volume bought and, therefore, poses the basis
for the reduction of procurement costs. The
emergence of these synergies should not be taken
for granted in every operation of M&A and for
each supplier; in fact, it is important that we reach
a critical size to gain significant bargaining power.
We need to estimate the probability of obtaining
favorable terms and the amount of benefits that
suppliers may grant.

3.2. Synergies Generated in the Production
Function

M&As can generate synergies related to increased
efficiency thanks to the new dimension reached by
the business combination. First of all, horizontal
M&As - i.e., between firms operating in the same
industry may consent the rationalization of the
production process, reaching a production capacity
that is optimal given industry dynamics and
technical aspects (such as the efficient use of
establishments or the minimum efficient scale)
(Capron, 1999).
A second class of potential synergies related to
the production function includes all sources of
economies of scale (Scherer, 1980; Gold, 1981;
Hill, 1988). Achieving economies of scale plays a
very important theoretical justification in M&As,
because they generate strong differences in
competitiveness between firms. Economies of
scale arise when the return of the production
function increases with the size of the production
plant (Collis and Montgomery, 1997). The
emergences of economies of scale imply a
reduction of average unitary production costs when
production increases (Lambrecht, 2004). Possible
sources of the basic achievements of economies of
scale (Zattoni, 2000) are:
a. the geometrical properties of some plants.
Cash flows generated from this synergy are
estimated with reasonable objectivity (i.e., flows
on the basis of differential) by technicians and
production engineers;
b. indivisibility of some inputs. M&As may
help balance the production line. Bringing the flow
of production to a level equal to the lowest
common multiple of the capacity of each machine.
The cash flows generated by this class of synergies
are also simple to estimate for technicians and
production engineers. In addition, when it is
possible to dismiss one or more plants, it is
appropriate to evaluate the flow of revenues
resulting from their sale;
c. stochastic increasing returns in the
management of stocks (finished and semi-
finished). These synergies are due to the fact that,
the amount of inventory with unforeseen needs is
less than the sum of stocks that firms previously
kept in their stores; and
d. similar considerations concern the reduction
of reserve capacity for the case of an unpredicted
increase of the number of customers served. In this
case, the evaluation needs to take into account
maintenance costs (operational and financial) of
spare capacity multiplied by the reduction of spare
capacity;
e. in theory, the synergies include the increase
of the statistical regularity that allows a more
efficient use of larger plants. Generally, however,
this impact is unimportant.
The last class of synergies regards the scope
Caspian Journal of Applied Sciences Research, 1(12), pp. 25-38, 2012
29
economies connected to the production function,
the value of which is relevant in the operations of
related diversification. Similarly to scale
economies, they generate cost saving flows.

3.3. Synergies Generated in the Marketing
Function

Firms may implement M&As in order to realize a
strategy of market domination and to create new
competitive conditions. Actually, M&A is an
efficacy tool to rapidly expand market share in an
industry. In this regard, however, it seems
appropriate to underscore synergies related to
reduction of competitive pressure are, taken on
their own, often insufficient to make the operation
of M&A profitable. In fact, Salant et al. (1983)
showed that, in absence of other synergies, the
horizontal merger between firms that use a game
scheme la Cournot is not profitable for the
business combination, while it creates benefits for
the remaining outside firms (the exceptions are
cases in which M&A deals involve almost all firms
originally active in the market).
The synergies resulting from the increased
market power stem from:
- the possibility of raising prices; and
- the reduction of marketing costs due to the
decrease in competition.
However, M&A deals are often intended as a
tool to defend the competitive position achieved. In
this case, the M&A aims to eliminate a firm,
although it is not a direct competitor, in order to
preempt it from launching an aggressive strategy in
the future. In this case, the evaluation of synergies
considers the differential increased cost in
advertising or reduction in product prices under the
hypothesis that the M&A had not been conducted.
When an M&A extends the business portfolio
and the scope economies of marketing, these
synergies can play an important role in
determining the operations performance. The
concept is very close to the above-mentioned
economies of scale applied to the production
function. Often, to ensure the development of the
firm, it may need to add different categories of
products to its portfolio, thus extending its product
range. In this sense, M&A operations may
represent a vehicle to grasp the strategic option of
entering a related market and, simultaneously,
exploiting the advantages of brand loyalty through
brand extension. Obviously, these synergies are
even more significant when the acquired firm is
anonymous, but operationally sufficiently
complete (Roedder and Loken, 1993). In addition
to brand scope economies, brand extension
strategies may enhance the brand equity of origin.
Often this strategy clarifies, strengthens, or widens
the scope of the brand of origin, increasing market
coverage, and revitalizing the sales of the brand
(Keller, 2003).
However, the extension of the brand into
another market can have negative effects for two
reasons. First, it may create confusion in consumer
preferences. Second, products made by the
acquired (or merged) firm may fail to satisfy a
quality level traditionally connected to the brand.
In such cases, the brand extension may generate a
negative effect on the image of the parent brand
(Reddy et al., 1994; Martinez and Pina, 2003;
Zimmer and Bhat, 2004).
If the synergies emerging from process of brand
extension are considered to derive from the
M&As value, then it must be considered as an
investment with a highly uncertain probability of
effective realization. Conversely, if the effects of
the brand extension are only a reduction in
communication costs, synergies can be evaluated
in terms of investment flows by considering their
differential levels.
In addition, the marketing function can generate
synergies in relation to the development of
multiple brands. Multiple brand strategy allows
companies to obtain more display space and
greater negotiation power with distribution firm.
These benefits should be carefully scrutinized, as
excessive use of multiple brands sparking off a
process of cannibalization between brands. In
this case, the business combination dissipates its
resources through a many-brand-sided
development, rather than focusing on a few brands
with high levels of profitability (Kotler, 1992).
Marketing synergies can also be connected to
sharing retail networks. M&As may consent the
access of new distribution channels (Mocciaro Li
Destri and Min, 2009, 2010), thus allowing to
reach different customer segments, or overcome
barriers to entry in certain markets.
Finally, synergies related to the marketing
function may emerge from the rationalization of
the marking workforce. These synergies are typical
in M&As that aim to expand the geographic
extension of the business portfolio. Divisions of
the new business combination that overlap in one
area, lead to the reduction of costs through the
elimination of duplicate facilities and personnel
redundancies.


Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
28
3.4. Synergies Generated in the Organization
Function

The integration of structures of the business
combination should ensure a desirable level of
both autonomy and coordination to the different
divisions. It is necessary to make decisions about
how to distribute authority positions within the
renewed organization, redesigning new tasks and
projects, including temporary teams. Human
resource management will focus first on
identifying workers who will remain part of the
business combination and, eventually on new
training. The organizational synergies amount to
the savings cost generated by fining redundant.
During the initial period, however, the net
investment required for the preparation of
organizational conditions for harmonization of
technical aspects must be consider.
Dismissal policies need particular attention.
The rationalization of corporate structures involves
both workers at the lower and middle level of the
organizational pyramid. In fact, sharing technical,
administrative and support activities often implies
making a part of the employees, redundant (or
relocating them). Finally, restructuring human
resources also involves middle and top
management. Often, a significant part of them are
excluded from new structures of corporate
governance. The policies of workers dismissal are
generate uncertainty and stress in human resources.
Under these conditions, they tend to reduce their
levels of activity and productivity.
Last but not least, we underscore that excessive
growth in size leads to phenomena of free-riding:
Each worker is potentially less controllable, and
this might be an incentive to contribute less than
required. In fact, when the span of control
increases, there is the need to create several
hierarchical levels that can however increase both
the costs and the level of rigidity of the
organizational structure.

3.5. Synergies Generated in the R&D Function

Before introducing the analysis of the synergies
that may emerge in R&D function, it is useful to
point out that although the operations of M&A are
a tool to enhance the capacity to access patented
innovations, the performance of this process does
not constitute a synergy. Actually, the same value
creation effect could be obtained simply by
licensing patent (namely, accessing the knowledge
patented through licenses).
The first class of synergies in the R&D function
stems from reaching a size which is critical in
order to join a network of firms, as complex
dynamic systems of knowledge and capabilities
(Dagnino et al., 2008), considered effective in
terms of innovation. The importance of such
relationships for the conquest and defense of
competitive advantages is related to the integration
of complementary skills between different firms
(for instance, Saxenian, 1994; Powell et al., 1996;
Basile, 2012). Synergies arise from the entrance in
a network of real options with low exercise
probability, the value of which depends on their
contribution to the network in generating
innovation, the probability of technological
success, and the likelihood of commercial success.
The actual realization of synergies related to
entering a new network is largely uncertain.
However, we underscore that information is the
critical resource that generates strategic flexibility
to recognize and capture project values hidden in
dynamic uncertainties. Actually, since information
is a critical resource in uncertain environments, the
main benefit of entry into a new network through
M&A deals is that it provides a platform for future
strategies.
The second class of synergies in R&D - fairly
common in M&A operations aimed at filling
technology gaps - is achieved through learning and
developing new technologies (Link, 1988; Capasso
and Meglio, 2005; Graebner et al., 2010). Makri,
Hitt and Lane (2010) find that similarities between
firms in knowledge facilitate incremental renewal,
while complementarities would make
discontinuous strategic transformations more
likely. Nonetheless, M&A may shape new
capabilities by integrating existing and new
resources that were previously unrelated; the
phenomena tend to have a high impact when the
M&A implements a related diversification
strategy. In fact, according to Finkelstein and
Haleblian (2002), routines and practices developed
in one firm transfer to other firms through business
combination operations on the basis of the degree
of similarity of industrial environments from which
they proven. However, organizational learning
thought M&A deals is extremely difficult
(Barkema and Schijven, 2008; Hitt et al., 2009)
vis--vis alliances (Dagnino et al., 2012).
This second class of synergies is typical of
M&As between large firms and small firms, in
which the big corporation has considerable
commercial and productive resources focused on
marginal innovations. Conversely, the small firm is
really innovative. In this perspective, M&As may
30
Caspian Journal of Applied Sciences Research, 1(12), pp. 25-38, 2012
29
play a role in reducing the time to generate an
innovation and the appropriation of value from it
(Mocciaro Li Destri and Dagnino, 2012)
The appreciation of the R&D synergies is
extremely complex (especially in international
M&A). In fact, the level of technological
knowledge gained by the two firms separately
results partly from the ability to absorb knowledge
from outside and partly from internal R&D, so
appreciation of the technological quality of
synergies as the fundamental driver of value
creation in M&A should be assessed in
relationship to the possibility of recombination of
knowledge and technology (Bresman et al., 1999).
Finally, a complex synergy to gain is the
possibility that M&A deals can increase invention
in new areas. M&As may foster the generation of
future choices and potential for proprietary access
to outcomes (McGrath et al., 2004). This
hypothesis underscores that operating in distant
markets increases a firms knowledge of its
resources various possible utilizations, thereby
generating new expansions possibilities. In this
perspective, M&A deals are a way to create new
possibilities for future efficiency. It supports the
capacity to learn how to alter the resource
configuration in adaptation to market changes. In
this case, the uncertainties underlying the estimate
of potential synergies increase significantly,
making it crucial to use precautionary criteria of
estimation. Precautionary criteria have also to
consider that, generally, M&A have a positive
effect on patenting output, but decrease patent
impact, originality, and generality (Valentini,
2012).

3.6 Synergies Generated in the Financial
Function

Since combinations of firms can improve the risk
profile of business combinations, the finance
function is a source of synergies in M&A deals. In
an M&A context, the variables that reduce the
level of risk connected to the firm are the larger
size of the resulting corporation firm and, possibly,
higher degree of diversification. Conversely, risk
increases whenever operating and financial
leverage ratios increase rending the firm more rigid
(Schweitzer et al., 1992). It is important to
understand if reductions in the risk factors are
offset (or more than offset) by increases in firm
financial or operational rigidity.
Since a conglomerates corporate office can
allow for a higher level of indebtedness (Lewellen,
1971; Picone, 2012) and advantages of
deductibility interests, a lower cost of debt capital
may emerge as result of M&A operation.
In the case of acquisitions, it is also important
for the estimation of the WACC to consider a
discount associated with the obstruction in the
deliberative assemblies that minority shareholders
could implement if they are excluded from any of
the benefits available to majority shareholders.

4. THE NATURE OF SYNERGIES

In the preceding section, we identified the sources
of synergies, using Porter value chain to map
them function by function. Moving from these
findings, we can classify potential synergies on the
basis of their nature and, in particular, their mode
of emergence. Following the classification
illustrated above, there are three types of synergies:
- the value of incremental cash flow synergies
that M&A deals generate (S
F
);
- the value of the real options synergies that
M&A deals generate (S
O
); and
- the value determined by changes in the firms
risk profile as a result of M&A (S
R
).
Regarding the classification of synergies
between differential flows or real options, we find
a criterion in the distinction between tangible and
intangible resources and the degree of innovation
entailed by the integration process. The emergence
of synergies from material resources, under the
organizational and technological compatibility,
through the generation of cash flow is relatively
straight forward to asses. In contrast, the
emergence of synergies regarding intangible
resources can be highly uncertain. Accordingly, in
the first case, the synergy benefits should be
evaluated by discounting the cash flows at a rate
whose level reflects the risk profile associated with
the businesses combination. In the second case, it
is better to refer to the option pricing models
developed by modern financial theory, since they
take into account the higher profile of uncertainty
to which this type of synergies is subject. In this
case, the discounted cash flow approach in itself
is insufficient and therefore, the options framework
is a valuable tool-kit not only for analysts but also
for the decision-makers in the top management of
the firm (Krishnamurti and Vishwanath, 2008:
139). Real option synergies underscore that an
M&A deal may create economic value using the
combination of scarce resources to undertake a
potential opportunity in the environment
(Andrews, 1971; Chatterjee, 1986). However, the
evaluation of these synergies makes sense only if
31
Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
28
in the future there the conditions for their
realization exists or at least is likely to be fulfilled.
Finally, the synergies determined by changes in
the corporations risk profile as a result of the
M&A (S
R
) and computed according to the rules of
finance should be considered in the definition of
the WACC discount rate. This practice is
consistent with the nature of S
R
(i.e. the risk of a
quality variable); consequently, it is estimated
indirectly.

Table 1: Matrix of the main synergies
Market power Sharing tangible resources Sharing intangible resources
- increased bargaining power
toward suppliers
- increased bargaining power
toward commercial distribution
- increased bargaining power
toward customers



- rationalization of corporate
structure (production and
administration)
- reduction of vertical integration
costs
- technological economies
- reduction of inventories
- economies of plant
- economies of scale
- economies of scope

Low degree of innovation

- economies of scale for marketing
function
- streamlining the sales network






High degree of innovation

- mode of access to new distribution
channels
- mode of entry into innovative
networks
- mode of learning technology
- invention of new sectors
- developing markets in poorly
staffed and brand extension
strategy





New risk profile (S
R
)

5. A MODEL OF SYNERGIES ASSESSMENT
IN M&A DEALS

The previous section offered a categorization of
the sources of synergy and how to assess them.
Obviously, the total value of the synergies in an
M&A operation is the result of their sum. In
particular, we have designed a method that
considers jointly the DCF techniques - to measure
S
F
and S
R
- and the Real Option technique - to
evaluate S
O
. The two approaches of financial
theory allow us to add values determined
separately, because they share the same heuristic
purpose, which is to summarize the potential value
of the complex results from a combination of
firms.
The methodology assumes the asset
perspective, considering the WACC rate
adjustment for the effects of debt (which we call
WACC**). We justify this choice because of the
need for agility, speed, and synthesis for the
selection of the target firm.
In this section, we focus our attention on the
addition of formula [7]. Indicates the change in
value of total debt.
Simplistically, we can rewrite the [6]
formula as:
[7]
) D D (D ) S S S ( ) W W ( W
AB B A R O F
B A
AB
+ + + + + + =
,

5.1 Estimating the Incremental Cash Flows

S
F


S
O

S
F

S
F


32
Caspian Journal of Applied Sciences Research, 1(12), pp. 25-38, 2012
33
The strategic plan of an M&A operation should
explain how the resources and skills will be
recombined to obtain market rents or economies in
costs. We distinguish between post-acquisition
synergies (or immediate), which are the result of
the new asset allocation (for example, the sale of a
plant unnecessarily duplicated as a result of the
operation of M&A), synergies achievable within
the time horizon of the plan, for which it is
possible to elaborate analytical predictions; and
potential synergies beyond the term of the plan. It
is not possible to analytically estimate the better
synergies; rather they can be estimated only on
average.
The value of incremental cash flows may be
calculated as follows:

[8]
* *
t * *
AB
t
1 i
i * *
AB i
F
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO
S

=
+
+

+
=

,

where (FCFO
iAB
) indicates the differential
operating cash flow of the businesses combination
estimated analytically; (FCFO
AB
) indicates the
average differential operating cash flow of the
businesses combination from the time t on; and
WACC** represents the weighted average cost of
capital of the businesses combination.

5.2 Estimating Real Options Synergies

As illustrated earlier, M&A operations may create
value by enhancing the degree of fine flexibility
and adaptability to external changes. Given the
uncertainty connected to these synergies, the DCF
evaluation method is inappropriate. However, real
option theory is able to evaluate the business
combinations capacity to identify major changes
in the external environment, quickly commit
resources to new courses of action in response to
those changes, and recognize and act promptly
when it is time to halt or reverse existing resource
commitments (Shimizu and Hitt, 2004). Using the
formula proposed by Black-Scholes model
adjusted for dividends, the value of a real option is
given by:
[9] ) N(d Ke ) N(d Se O
2
rt
1
yt
= .
where S is the present value of the potential
development project; K is the initial investment
necessary for the development of the project; R
indicates the risk-free interest rate corresponding to
the duration of the option; T is the time to
expiration in years; Y indicates the instantaneous
rate of dividend; and N (d
1
) and N (d
2
) are
functions corresponding to the cumulative normal
distribution to standard normal variables,
respectively:

t
t
2

y - r
K
S
ln
d
2
1
|
|
.
|

\
|
+ + |
.
|

\
|
= e t d d
1 2
= ;

where
2
is the variance of the natural logarithm
of the value of the underlying asset.
It is important to stress that several problems
may arise. The first is the difficulty of estimating
all variables of the new investment and their
capability to generate cash flow. Second, the
evaluation of real options requires a cautious
approach. The evaluation is justified by the
possibility of creating sustainable competitive
advantages in the long run. If the process of
evaluation is repeated for all p flexibility options
that the operation of M&A generates, we have the
value of S
O
.

[10] | |

= =

= =
p
1 h
p
1 h
h 2
rt
1
yt
h O
) N(d Ke ) N(d Se O S .

5.3 Estimating the Synergies that Emerge from
a Different Risk Profile

Finally, we must proceed to estimate the synergies
that arise from the different risk profiles. We
compare the value of firms under the assumption
of unity of the economic entity (businesses
combination) and the value of firms under
situations of managerial independence (as before
the extraordinary operation), i.e., standalone firms.
Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
34
We can formalize the evaluation of synergies that emerge from a different risk profile as follows:

[11]
. D
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO

D
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO
D D
WACC
) WACC )(1 FCFO (FCFO
) WACC (1
) FCFO (FCFO
S
B
* *
B
t * *
B B
t
1 i
i * *
B
iB
A
* *
A
t * *
A A
t
1 i
i * *
A
iA
B A
* *
t * *
B A
t
1 i
i * *
iB iA
R

+
+
+

+
+
+

+ +
+
+
+
=

where FCFO
iA
, FCFO
iB
are respectively the
operating cash flows of firm A and firm B in year
i; FCFO
A
, FCFO
B
are respectively the average
operating cash flow of the firm A and the firm B
from t on; and D
A
and D
B
are the economic value
of the debts of the firm A and of the firm B.
The WACC of A and B before the M&A
transaction is adjusted on the basis of the
procedure in order to keep the tax benefits of debt
into account.
Simplifying the above expression, we have:

[12]
.
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO

WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO

WACC
) WACC )(1 FCFO (FCFO
) WACC (1
) FCFO (FCFO
S
* *
B
t * *
B B
t
1 i
i * *
B
iB
* *
A
t * *
A A
t
1 i
i * *
A
iA
* *
t * *
B A
t
1 i
i * *
iB iA
R

+
+
+

+
+
+

+ +
+
+
+
=

Estimating the Total Value of Synergy (S
F
)
To find a synthesis of all the expressions obtained, we proceed to combine [7], [8], [10] and [12]:

[13]
| |
. D
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO

WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO


WACC
) WACC )(1 FCFO (FCFO
) WACC (1
) FCFO (FCFO
) N(d Ke ) N(d Se
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO
S
AB
* *
B
t * *
B B
t
1 i
i * *
B
iB
* *
A
t * *
A A
t
1 i
i * *
A
iA
* *
t * *
B A
t
1 i
i * *
iB iA
p
1 h
h 2
rt
1
yt
* *
t * *
AB
t
1 i
i * *
AB i

+
+
+

+
+
+

+ +
+
+
+
+
+ +
+
+
+

+
=

=
=

From this formula, we derive the following compact formula:
[14]
| | . D ) N(d Ke ) N(d Se
WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO

WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO

WACC
) WACC )(1 (FCFO
) WACC (1
) (FCFO
S
p
1 h
AB h 2
rt
1
yt
* *
B
t * *
B B
t
1 i
i * *
B
iB
* *
A
t * *
A A
t
1 i
i * *
A
iA
* *
t * *
AB
t
1 i
i * *
iAB

=
+
+

+
+
+

+
+
+

+
+
+
=


Caspian Journal of Applied Sciences Research, 1(12), pp. 25-38, 2012
35
6. CONCLUSIONS

This paper offers a systematic analysis of the
sources of the synergies that can emerge in a M&A
deal, mapping function by function and
categorizing the synergies on the basis of their
emergence. Moving from the idea that, if the
strategy is unclear, there is no reason for a firm to
make on M&A deal (Bower, 2001), this analysis
provides the fundamentals for the subsequent
development of a methodology for estimating
different classes of synergies. We make clear the
hidden potential of a generic M&A. A proper
assessment of options for external growth is not
possible without appreciating strategic and
organizational aspects on the basis of the
estimation of the differential cash flows related to
synergies, the impact of M&A on the risk profile
of businesses combination and, finally, without
taking into due consideration the options that the
operation of M&A can generate in terms of
operational and strategic flexibility. The extent of
synergies not included in traditional evaluation
formula is therefore an issue that bridges the gap
between strategy and finance, as it requires a
unified view of phenomena and key operational
processes found in M&A.
The benefits related to a methodology of
assessment of synergies in M&A transactions are
numerous, and extend far beyond the proper
definition of the price fixed through negotiation
between the parties. In particular, these additional
benefits include:
- a template to support the selection of the
target firm (Mitchell and Shaver, 2003). The
measure of potential synergies allows us to
compare different candidate firms. Thus, the
evaluation model proposed may support
management decision-making (Cobblah et al.,
2010);
- a support for the processes of planning and
management of the integration between the firms
(Zollo and Singh, 2004; Schweiger and Lipper,
2005; Dagnino and Pisano, 2008; Teerikangas et
al., 2011) since the value of synergies becomes a
strategic goal and, hence, the instrument to guide
the process of integration between the firms; and
- the definition of a premium of acquisition
consistent with the value of potential synergies, the
payment of the premium (Chang, 1998), and the
management of the financial structure (Lewellen et
al., 1995; Maloney et al., 1993) of the corporations
as a result of the M&A.
This paper gives no specific solutions to a
limited number of aspects of the proposed
methodology for the estimation of synergies,
which may represent areas of interest for further
research on the topic. More research needs to be
done to examine on methods - qualitative and
quantitative information to accurate the
estimation of the unlevered cost of equity of the
combining firms. In this perspective, we recall also
the need to develop rigorous algorithms for
correction of the rate to discount cash flows to
consider tax benefits, the costs of (so-called)
financial stress, and control costs.
Finally, the applicability of financial options
techniques asks new investigations on applicable
principles of option pricing theory in real contexts.
While Black-Scholes formula is appropriate to
assess the value of a financial investments, the
application of Black-Scholes formula in real
context violates some theoretical assumptions, e.g.
the lognormal distribution of the project values. On
the other hand, empirical estimation of the inputs
in Black-Scholes formula is really complex, for
example the volatility is not easy to estimate.

REFERENCES

Alexandridis G, Petmezas D, Travlos NG (2010).
Gains from Mergers and Acquisitions
Around the World: New Evidence. Financial
Management Journal, 39(4): 1671-1695.
Andre P, Kooli M, LHer J (2004). The Long-Run
Performance of Mergers and Acquisitions:
Evidence from the Canadian Stock Market.
Financial Management, 33(4): 27-43.
Andrews KR (1971). The Concept of Corporate
Strategy, Dow-Jones-Irwin, Homewood, III.
Barkema HG, Schijven M (2008). How do firms
learn to make acquisitions? A review of past
research and an agenda for the future.
Journal of Management, 34(3): 594-634.
Basile A (2012). Evaluating R&D Networking to
Revitalize SMEs Innovative Performances: a
Management Perspective. Business: Theory
and Practice, 13(3): 217-227.
Bower J (2001). Not all M&As Are Alike and
That Matters, Harvard Business Review,
79(3): 92-101.
Bresman H, Birkinshaw J, Nobel R (1999).
Knowledge transfer in international
acquisitions. Journal of International
Business Studies, 30(3): 439-462.
Bruner R (2004). Applied Mergers and
Acquisitions. John Wiley & Sons, New
York.
Capasso A, Meglio O (2005). Knowledge transfer
in mergers and acquisitions: how frequent
Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
36
acquirers learn to manage the integration
process. In Capasso A, Dagnino GB, Lanza
A (2005). Strategic Capabilities And
Knowledge Transfer Within And Between
Organizations: New Perspectives from
Acquisitions, Networks, Learning And
Evolution Edward Elgar Publishing, 199-225
Capron L (1999). The Long-Term Performance of
Horizontal Acquisitions. Strategic
Management Journal, 20(11): 9871018.
Chang S. (1998). Takeovers of Privately Held
Targets, Methods of Payment, and Bidder
Returns. Journal of Finance, 53(2): 773-84.
Chatterjee S (1986). Types of Synergy and
Economic Value: The Impact of Acquisitions
on Merging and Rival Firms. Strategic
Management Journal, 7(2): 119-139.
Choi J, Russell J (2004). Economic Gains around
Mergers and Acquisitions in the Construction
Industry of the United States of America.
Canadian Journal of Civil Engineering,
31(3): 513- 525.
Cobblah M, Graham M, Yawson A (2010). Due
diligence on strategic fit and integration
issues: A focal point of M&A success. In
Gleich IR, Kierans G, Hasselbach T (eds.)
Value in Due Diligence, Gower Publishing
Ltd, Surrey, England. UK, 3-15.
Collis DJ, Montgomery CA (1997). Corporate
Strategy: Resources and the Scope of the
Firm, Irwin, Chicago.
Dagnino GB, Filippas V, Mocciaro Li Destri A,
Rocco E (2012). Le alleanze strategiche quali
percorsi di creazione di valore: unindagine
qualitativa sulle alliance evolution
capabilities. Finanza Marketing e
Produzione, 1: 93-139.
Dagnino GB, Levanti G, Mocciaro Li Destri A
(2008). Evolutionary Dynamics of Inter-firm
Networks: A Complex Systems Perspective.
Advances in Strategic Management, 25: 67-
129.
Dagnino GB, Pisano V (2008). Unpacking the
champion of acquisitions: The key figure in
the execution of the post-acquisition
integration process. In Cooper CL,
Finkelstein S (eds.). Advances in mergers
and acquisitions. Edited by Emerald Group
Publishing Limited: Bingley, UK, 51-69.
Dixit AK, Pindyck RS (1994). Investment Under
Uncertainty. Princeton University Press,
Princeton.
Ficery K, Herd T, Pursche B (2007). Where has all
the synergy gone? The M&A puzzle. Journal
of Business Strategy, 28(5): 29-35.
Finkelstein S, Haleblian J (2002). Understanding
acquisition performance: The role of transfer
effects. Organization Science, 13(1): 36-47.
Ghosh A (2002). Does Operating Performance
Really Improve Following Corporate
Acquisition?. Journal of Corporate Finance,
7(2): 151-178.
Gold B (1981). Changing Perspectives on Size,
Scale, and Returns: An Interpretive Survey.
Journal of Economic Literature, 19(1): 533.
Graebner ME, Eisenhardt KM, Roundy PT (2010).
Success and Failure in Technology
Acquisitions: Lessons for Buyers and Sellers.
Academy of Management Perspectives.
24(3): 73 92.
Grant RM (1996). Toward a knowledge-based
theory of the firm. Strategic Management
Journal. 17 (Winter Special Issue), 109122.
Gruca TS, Nath D, Mehara A (1997). Exploiting
Synergy for Competitive Advantage. Long
Range Planning, 30(4): 605-611.
Haleblian J, Devers CE, McNamara G, Carpenter
MA, Davison RB (2009). Taking Stock of
What We Know about Mergers and
Acquisitions: A Review and Research
Agenda. Journal of Management, 35: 469-
502.
Heron R, Lie E (2002). Operating Performance and
the Method of Payment in Takeovers.
Journal of Financial and Quantitative
Analysis, 37(1): 137-156.
Hill CWL (1988). Differentiation versus Low Cost
or Differentiation and Low Cost: A
Contingency Framework. Academy of
Management Review, 13(3): 401412.
Hitt M, King D, Krishnan H, Makri M, Schijven M
(2009). Mergers and Acquisitions:
Overcoming Pitfalls, Building Synergy, and
Creating Value. Business Horizons, 52(6):
523-529.
Hitt MA, Harrison JS, Ireland RD (2001). Mergers
and Acquisitions: A Guide to Creating Value
for Stakeholders. Oxford University Press:
Oxford, U.K.
Ismail TH, Abdou AA, Annis RM (2011). Review
of Literature Linking Corporate Performance
to Mergers and Acquisitions. The Review of
Financial and Accounting Studies, 1:89-103.
Keller KL (2003). Strategic Brand Management:
Building, Measuring, and Managing Brand
Equity, 2
nd
edition, Prentice-Hall, New
Jersey, USA
King D, Dalton D, Daily C, Covin J (2004). Meta-
Analysis of Post-Acquisition Performance:
Identifications of Unidentified Moderators.
Caspian Journal of Applied Sciences Research, 1(12), pp. 25-38, 2012
37
Strategic Management Journal, 25(2): 187-
200.
Kotler P (1992). Marketing Management. Analysis
Planning, Implemetation and Controll. 7th
ed, Prentice-Hall, New York, USA
Krishnamurti C, Vishwanath SR, (2008). Mergers,
Acquisitions and Corporate Restructuring.
SAGE Publications, Los Angeles CA, USA.
Krishnan HA, Hitt MA, Park D, (2007).
Acquisition premiums, subsequent workforce
reductions, and post-acquisition
performance. Journal of Management
Studies, 44(5): 709-732.
Laamanen T. (2007). On the role of acquisition
premium in acquisition research. Strategic
Management Journal, 28(13): 1359-1369.
Lambrecht BM (2004). The Timing and Terms of
Mergers Motivated by Economies of Scale.
Journal of Financial Economics, 72(1): 41
62.
Lewellen W, Loderer C, Rosenfeld A (1995).
Merger Decisions and the Executive Stock
Ownership in Acquiring Firms. Journal of
Accounting and Economics, 7(1-3): 209-231.
Lewellen WG (1971). A pure financial rationale
for the conglomerate merger. Journal of
Finance, 26(1): 521-537.
Link NL (1988). Acquisition as Source of
Technological Innovation. Merger &
Acquisition, nov./dec.: 36-39.
Makri M, Hitt MA, Lane PJ (2010).
Complementary Technologies, Knowledge
Relatedness, and Invention Outcomes in
High Technology Mergers and Acquisitions.
Strategic Management Journal, 31(6): 602
628.
Maloney M, McCormick R, Mitchell M (1993).
Managerial decision making and capital
structure. Journal of Business, 66(2): 189-
217.
Martinez E, Pina MJ (2003). The negative impact
of brand extension on parent brand image.
Journal of Brand Management, 12(7): 432-
448.
Massari M (1998). Finanza aziendale. Valutazione.
McGraw Hill, Milano.
McGrath RG, Ferrier W, Mendelow A (2004).
Real options as engines of choice and
heterogeneity. Academy of Management
Review, 29(1): 86-101
Megginson W, Morgan A, Nail L (2004). The
Determinants of Positive Long-Term
Performance in Strategic Merger: Corporate
Focus and Cash. Journal of Banking and
Finance. 28(3): 523-552.
Meglio O, Capasso A (2012). The Evolving Role
of Mergers and Acquisitions in Competitive
Strategy Research. In: Dagnino GB. The
Handbook of Research on Competitive
Strategy. Edward Elgar Cheltenham.
Mitchell W, Shaver JM (2003). Who Buys What?
How Integration Capability Affects
Acquisition Incidence and Target Choice.
Strategic Organization, 1(2): 171-201.
Mocciaro Li Destri A, Dagnino GB (2012).
Learning to Synthesize Contradictions: An
Austrian Approach to Bridging Time
Concepts in the Strategic Theory of The
Firm. International Journal of Strategic
Change Management, 4(2): 99-128.
Mocciaro Li Destri A, Min A (2009). Coopetitive
dynamics in distribution channel
relationships. Finanza Marketing e
Produzione, 2: 1-21.
Mocciaro Li Destri A, Min A (2010).
Levoluzione delle relazioni fra industria e
distribuzione in Italia nel XX secolo. Annali
della Facolt di Economia dellUniversit
degli studi di Palermo.
Mocciaro Li Destri A., Picone P. M. & Min A
(2012). Bringing Strategy Back into
Financial Systems of Performance
Measurement: Integrating EVA and PBC,
Business System Review, 1(1): 85-102
Payne AF (1987). Approaching acquisitions
strategically. Journal of General
Management, 13(2): 5-27.
Perry M (1989). Vertical Integration: Determinants
and Effects, in R. Schmalensee, Willing R.D.
(a cura di) Handbook of Industrial
Organization, vol. I, North Holland, New
York.
Picone, PM (2012). Conglomerate Diversification
Strategy and Corporate Performance.
Unpublished Doctoral Dissertation,
University of Catania, Italy,
http://hdl.handle.net/10761/1167
Porter M (1985). Competitive Advantage, Free
Press. New York, USA.
Powell WW, Koput KW, Smith-Doerr L (1996).
Interorganizational Collaboration and the
Locus of Innovation Networks of Learning in
Biotechnology. Administrative Science
Quarterly, 41(1): 116 145.
Ramaswamy KP, Waegelein J (2003). Firm
Financial Performance Following Mergers.
Review of Quantitative Finance and
Accounting, 20(2): 115-126.
Reddy SK, Holak S, Bhat S (1994). To Extend or
not to Extend: Success Determinants of Line
Mocciaro Li Destri et al.
From Strategic Fit to Synergy Evaluation in M&A Deals
36
Extensions. Journal of Marketing Research,
31(2): 243-262.
Roedder JD, Loken B. (1993). Diluting brand
beliefs: when do brand extensions
have a negative impact?. Journal of
Marketing. 57(3): 71-84.
Salant SW, Switzer S, Reynolds RJ (1983). Losses
from Horizontal Mergers: the Effects of an
Exogenous Change in Industry Structure on
Cournot-Nash Equilibrium. Quarterly
Journal of Economics, 98(2): 185-199.
Saxenian, AL (1994). Regional Advantage.
Harvard University Press, Cambridge.
Scherer FM (1980). Industrial Market Structure
and Market Performance. Rand McNally:
Chicago, IL.
Schweiger DM, Lipper RL (2005). Integration:
The Critical Link in M&A Value Creation
in Stahl GK, Mendenhall ME, Mergers and
Acquisitions Managing Culture and Human
Resources, 17-45.
Schweitzer M, Trossmann E, Lawson G (1992).
Break-even analysis: basic models, variants,
extensions, John Wiley & Sons.
Shelton LM (1988). Strategic Business Fits and
Corporate Acquisition: Empirical Evidence.
Strategic Management Journal, 9(3): 279-
287.
Shimizu K, Hitt MA (2004). Strategic flexibility:
Organizational preparedness to reverse
ineffective strategic decisions. Academy of
Management Executive, 18 (4): 44-59.
Sirower M (1997) The synergy trap: how
companies lose the acquisition game, The
Free Press, New York.
Sirower ML, Sahni S (2006). Avoiding the
Synergy Trap: Practical Guidance on
M&A Decisions for CEOs and Boards.
Journal of Applied Corporate Finance, 18(3):
8395.
Smit HTJ, Trigeorgis L (2004) Strategic
Investment: Real Options and Games,
Princeton University Press: New Jersey.
USA.
Teerikangas S, Vry P, Pisano V (2011).
Integration managers value capturing roles
and acquisition performance, Human
Resource Management, 50(5): 651-683.
Tse T, Soufani K (2001). Wealth Effect of
Takeovers in Merger Activity Eras:
Empirical Evidence from the UK.
International Journal of Economics of
Business, 8(3): 365-377.
Valentini G (2012). Measuring the Effect of M&A
on Patenting Quantity and Quality. Strategic
Management Journal, 33(3): 336346.
Very P (2011). Acquisition performance and the
Quest for the Holy Grail. Scandinavian
Journal of Management, 27(4): 434-437.
Williamson OE (1971). The Vertical Integration of
Production: Market Failure Considerations.
American Economic Review, 61(2): 112-
123.
Yook KC (2004). The Measurement of Post-
Acquisition Performance Using EVA.
Quarterly Journal of Business & Economics,
43 (3&4): 67- 84.
Zanetti L (2000). La valutazione delle acquisizioni.
Egea, Milano.
Zattoni A (2000), Economia e governo dei gruppi
aziendali. Egea, Milano.
Zimmer MR, Bhat S (2004). The reciprocal effects
of extension quality and fit on parent brand
attitude. Journal of Product Brand
Management, 17(1): 37- 46.
Zollo M, Meier D (2008). What Is M&A
Performance?. Academy of Management
Perspectives, 22(3): 55-77.
Zollo M, Singh H (2004). Deliberate Learning in
Corporate Acquisitions: Post-Acquisition
Strategies and Integration Capabilities in
U.S. Bank Mergers. Strategic Management
Journal, 25(13): 1233-1256.

38