The purpose of this study is to develop a valuation framework for mergers and acquisitions by explicitly incorporating the synergy effect of mergers. Based on the real options approach, we introduce the upper and lower bounds of terms for an acquirer that makes a merger profitable to both the...

In this paper, we promote the approach of relative indifference pricing as a conceptual enhancement of real options theory whenever incompleteness comes into play. As until now the discussion of this concept is limited to the field of mathematical finance, our goal is to stimulate its diffusion...