Build or Buy? Synergy Evaluation in M&A

• Published in: 2023 16th International Conference Management of large-scale system development (MLSD) pp. 1 - 4
• Main Author: Akinfiev, Valery
• Format: Conference Proceeding
• Language: English
• Published: IEEE 26-09-2023
• Subjects: Analytical models; Companies; Conference management; M&A; production and financial model; Production facilities; Sensitivity; Software packages; synergy; Uncertainty; value chain
• DOI: 10.1109/MLSD58227.2023.10303827

The purpose of this work is to develop methods for assessing the synergistic effect in M&A transactions based on the use of dynamic production and financial models. Much of the literature on the synergy effect of M&A transactions usually focuses on a specific type of synergy. At the same time, this article proposes an approach that considers the cumulative effect of various types of operational and financial synergies. We use the TEO-INVEST software package to build production and financial models of companies. The model includes several blocks, each of which must be customized to the specifics of the company. The proposed approach allows us to take into account all changes in the value chain of the parent company during the consolidation of acquired companies and their impact on changes in the company's net cash flow. The method allows you to evaluate and select investment options in the vertical integration of a company, consisting of alternatives - buy an existing production asset or build a new production facility. Examples of applying the proposed method for choosing investment decisions are given in the example of a metallurgical company.