We examine bidding firms' motives for disclosing a synergy forecast when announcing a merger or acquisition. Our sample consists of 1990 M&A deals, of which 345 announce synergy estimates. Our results suggest that synergy disclosures serve to obtain a more favorable market reception for deals that would otherwise induce highly negative bidder announcement returns. After controlling for the endogeneity of the disclosure decision, synergy forecast disclosures result in approximately 5% higher bidder stock returns. The main deterrents of disclosing synergy values are lack of precise information on synergy values available to bidding firm management, and shareholder litigation risk. Bidders do not seem to use synergy disclosures to strategically influence takeover premiums or competition for the target.

Information asymmetry, Mergers and acquisitions, Synergies, Voluntary disclosure
Mergers; Acquisitions; Restructuring; Corporate Governance (jel G34), Accounting (jel M41)
dx.doi.org/10.1016/j.irfa.2013.09.005, hdl.handle.net/1765/88441
ERIM Top-Core Articles
International Review of Financial Analysis
Erasmus Research Institute of Management

Dutordoir, M.D.R.P, Roosenboom, P.G.J, & Teixeira de Vasconcelos, M. (2014). Synergy disclosures in mergers and acquisitions. International Review of Financial Analysis, 31, 88–100. doi:10.1016/j.irfa.2013.09.005