Building up a Research Framework on Potential Synergy in Strategic M&A

Strategic merger and acquisition is a major kind of M&A in western control market, it has been developed largely in our country for recent years. The important motive of strategic M&A is to obtain synergy, so the study on synergy mechanism and computation is very important. In this paper, we divide synergy into three kinds: potential synergy, anticipated synergy and actual synergy. There are two methods to compute synergy at present: CAR method and finance indicators method, but they are ex post facto. The synergy calculated by these methods is called actual synergy, and it is ex-post. Practically M&A need to estimate the potential synergy theoretically in advance according to the characters of target and acquiring firms. The potential synergy multiplied by resource transfer efficiency is equal to anticipated synergy, and anticipated synergy multiplied by integration efficiency is equal to actual synergy. Potential synergy is the basis of anticipated synergy, so it is very important to study the potential synergy and evaluate the anticipated synergy in order to select target, make merger decision and distinguish the duty between manager and decision-maker. This paper is trying to build up a study framework on measuring potential synergy which is the first step of synergy evaluation in strategic M&A