AHP-based synergy allocation to the partners in a merger

Abstract

Many corporations try to overcome vulnerabilities by external alliances with other corporations. This paper concentrates on the merger case in member states of the European Community under the premise that synergies are to be expected from such a transaction. In this context synergy will be understood as the difference between the capitalized earning power of the merger firm and the sum of the capitalized earning powers the companies could expect when operating alone. This article presents a method to allocate the financial effect to the partners in a merger. Based on the format procedure of the Analytic Hierarchy Process, the method allocates synergy to the partners according to the impact intensities of their performance potentials on this synergistic effect.