Valuing synergies in strategic mergers and acquisitions using the real options approach

An investigation was conducted to study a sample of 23 Greek firms listed on the Athens Stock Exchange that underwent mergers from 2011 to 2015, which is a period that embodies the Greek economic crisis. For the investigation, the authors use statistical tests to explore relative changes at twenty accounting ratios of the sample firms. These ratios are computed for one year before and after the merger. These ratios are found to be statistically insignificant indicating firms do not experience a post-merger improvement in accounting performance. The authors also examine six qualitative variables representing merger characteristics as past managerial decisions. Important findings for these characteristics include the following. First, for companies that do not fall under the same production line, the researchers observe an improvement for three ratios: collection period ratio, return on total assets, and profit or loss before tax. Thus, liquidity and profitability are improved. Second, when companies merged with their subsidiaries, the authors discover significant improvement for two ratios: gross margin and collection period ratio. In brief, positive results are found for mergers with subsidiaries and negative results with others. Third, the payment method influences two ratios, the current ratio and the stock turnover ratio. The current ratio is affected positively for the transactions in cash and negatively for the transactions in shares, while the stock turnover ratio is affected negatively for cash transactions and positively for share transactions.

Investment analysis is a crucial process for any investment’s success. This process can be supported by both the discounted cash flow analysis and the real options analysis. Many researchers have point out restrictions for the first one, in cases of uncertainty in the entrepreneurial environment. The main types of uncertainty, concerning the wind energy sector, include uncertainties related to the price of electriticity by RES, the public policy regulatory policies, the demand, the initial capital costs, the technological progress, the weather conditions, the political and economical situations and generally the RES market structure. In this paper, we try to find the optimal investment strategy in a liberalized global electricity market, where the price of electricity is uncertain while the other parameters are configured separately in each country. The authors consider about the factors of the time for investment and the electricity’s price level, in wind energy by using the real options theory. The authors select a variety of data for the wind energy industry from different countries in several continents, and also create a model for the investment analysis in this entrepreneurial sector.

The implementation of the 2004–2005 bank capital reform in Nigeria, introduced to deepen the financial capacity of the banking system, has led to a major restructuring of the banking sector. The reform required banks to increase their equity capital by about 1150 per cent (from two billion to twenty-five billion naira) within 18 months. Due to compliance challenges, the reform formed just twenty-five out of eighty-nine banks that previously existed. More than seventy-five per cent of the banks emerged through mergers and acquisitions. However, despite the massive increase in assets and deposit growth, episodes of bank distress have remained a recurring irritant in the country’s financial system. This study compares bank performance in the pre- and post-reform periods to determine the usefulness or efficacy of the capital reform in boosting bank performance based on panel analysis of data from five banks. The study covered the period 1996–2016. The generalized method of moments was used to evaluate the parameters of the model. The result of the random effects model shows a weak positive effect of total assets and deposit growth on bank performance in the pre-reform period. However, the post-reform assessment reveals that while profitability is significantly low in large-sized banks, it is higher in smaller banks. Given the above evidence, the study asserts that profit performance of banks is substantially linked to restructuring of the sector.