Scientific Papers

JOURNAL OF INTERNATIONAL STUDIES


© CSR, 2008-2013
ISSN: 2306-3483 (Online), 2071-8330 (Print)

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The factors driving the synergy value in mergers of mechanical engineering companies in the Czech Republic

Vol. 11, No 3, 2018

 

Mária Režňáková

 

Faculty of Business and Management 

Brno University of Technology

Czech Republic

reznakova@fbm.vutbr.cz

The factors driving the synergy value in mergers of mechanical engineering companies in the Czech Republic

Jan Pěta

 

Faculty of Business and Management 

Brno University of Technology

Czech Republic

peta@fbm.vutbr.cz


 

 

 

 

 

 

 

Abstract. Research into factors that influence the outcome of mergers and acquisitions conducted over a few past decades focused on two areas, one being the forecasting of the volume of expected investments, the other investigating M&A efficiency, i.e. the search for the factors that drive the growth of value of combined firms (identification of the sources of synergy). Operating synergies, resulting from cost savings and investment reduction, are deemed the primary source of synergy. Determining the synergy value is a prerequisite for identifying sources of savings. This paper presents the results of research aimed at determining the synergy value and identifying the factors representing potential sources of synergy. The discounted capital cash flow method was used to determine the synergy value. In the set of 50 mergers carried out between 2004 and 2011 that we investigated, we found that a negative synergy effect developed at an average level of 8.13%. This means that most of these mergers were not associated with additional profits for the owners. The correlation between the selected financial ratios and the synergy value was tested. The results show that there is a statistically significant relationship between the indicators based on cash flow and the synergy value.

 

 

Received: December, 2017

1st Revision: February, 2018

Accepted: May, 2018

 

DOI: 10.14254/2071-

8330.2018/11-3/19

 

JEL ClassificationG32, G34, L2

Keywordsmergers in mechanical engineering, effect of mergers, operating synergies, capital cash flow, value of synergies, Czech Republic