CF: Mergers/Acquisitions - Synergy someone, sorry, please, ask

morebeans

I'm sorry to ask, but i can't seem to find the formula.

Can someone please post the formula to compute synergy

Thanks in advance

llxx

I dunno if there is a formula. I usually just work those out using intuition.

New value of the firm = Value of acquirer + value of acquieree + synergy

Then figure out the new share balance if being paid in shares (or subtract out the cash paid from the total new value if being paid in cash). Divide new value of the firm by the new share value and you get the price/share. This should get you 90% of the way. Then just figure out the rest. I feel these questions can be pieced together if you just think it through.

spreads

I saw the formula for synergy in one of the sample exams from schweser

thecfawannabe

V(AT) = V(A) + V(T) + S - C
Gains(Acquirer) = S - (P - V)

Those are the only 2 formulae that have synergy (S) in them.

comp_sci_kid

just figured it out, all stock merger: Synergy = combined value after merger - Va - Vb

typical me: panic over some random formula that I don't know