The Calculation Of Synergy And Several Applications Of Real Option In M&A

With the development of capital market, more and more merger and acquisition has happened in China. Many authors began to study various problems, such as synergy, valuation which are key issues in M&A. In this paper, we discuss the part of synergy carefully after dividing the value of the object company and get lots of useful relative results. We believe that the model considered here is a potentially useful model to get knowledge about merger cases in the market especially the key issues of synergy and stock exchange ratio.We categorize synergy into three parts which are operational synergy,collusive synergy and control option premium by their causes, using different effective models to calculate their values. We improve the micro economic model to calculate the operational synergy, put forward a new model based on more realistic hypothesis and proved several results. A sufficient and a necessary condition are given in discussing the value of collusive synergy which have economic meanings. Moreover, we introduce the method of real option to discuss control option premium and to calculate the optimum merger time in considering the collusive synergy model. The choice of which one is more profitable, merge several companies at the same time or one by one, can be given by our model.In terms of the stock exchange ratio, we compare some pros and cons of current models and introduce a new model with the jumps in the stock price to reflect uncertainty happened in the involved companies'stock market during merger periods.