Measuring the M&amp;A Value of Control and Synergy in Central and Eastern European Transition Economies with the Case of Avast - AVG Acquisition

David Moreira,Karel Janda

doi:10.18267/j.efaj.194

Abstract

We examine the valuation of synergies and control in mergers and acquisitions (M&A) in Central and Eastern European (CEE) transition economies. We determine this value based on comprehensive contemporaneous financial findings extracted from the Thomson Reuters database. Worldwide the market of mergers and acquisitions (M&A) is increasing, reaching in 2016 a value of 6.000 billion EUR globally. Among the CEE transition economies, the M&A total value in the same period was 50 billion EUR. It is widely accepted that between 60% and 80% of M&As are unsuccessful in value creation, so we further research evidences about an alternative framework to value the M&A also qualitatively. We develop a valuation model for prediction of the value of control and synergy in M&A deals. We suggest further directions for analysis in the field of M&A value creation, and recommend an alternative to the most used earning per share metric to enhance the predictability and transparency of valuation worldwide.

Highlights

This article primarily aims to empirically demonstrate with a case-study evidences about the valuation of synergies and control of mergers and acquisitions (M&A) in Central Eastern European transition economies, and secondly recommends improvements on the respective valuation framework
Do M&A synergy and control create value in Central and Eastern European (CEE) transition economies when measured by earnings per share metric? Secondly, is there an alternative qualitative framework to assess and evaluate the performance of M&A? The total value of M&A activity among the studied countries reached 50 billion EUR, the authors found that just a relatively small part of them created value when measured by the most commonly used valuation metric Earnings Per Share (EPS) (Farrell, Shapiro, 2001)
The authors will present a case study measuring the valuation of control and synergy of the company Avast acquisition of its peer AVG, in a 1.3 billion USD transaction

Summary

Introduction

This article primarily aims to empirically demonstrate with a case-study evidences about the valuation of synergies and control of M&As in Central Eastern European transition economies, and secondly recommends improvements on the respective valuation framework. The authors will present a case study measuring the valuation of control and synergy of the company Avast acquisition of its peer AVG (the acquired company), in a 1.3 billion USD transaction This is a major contribution of this paper and it addresses the questions raised by the authors. These two companies started in the Czech Republic before the dotcom revolution in the 90’s and during the last few years became the worldwide leaders in the software anti-virus segment. The questions formulated by the authors add value to the scientific research because the current scientific evidence on the M&A post-transaction performance in the CEE region is almost non-existent. (Bradley, 1983)

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Methods

Conclusion