Market Reaction to Synergy Disclosure in M&A : From a management perspective : How should the disclosure of projected synergies be approached in M&A announcements?

Abstract

We use a sample of U.S. public deals from 2012-2021 and examine the short-term market reaction to synergy disclosure in M&A announcements. We do not find that synergy disclosure per se impacts acquirer returns. The lack of impact is attributable to the manner by which forecasted synergies are presented. By performing textual analysis on investor presentations, we construct measures of synergy emphasis, sentiment, and readability. We find that managements disclosing synergies with a highly positive tone outperform those with a neutral or negative tone.