In a stock-financed merger, given the presence of asymmetric information and the possibility that the acquirer's stock is overvalued, how can we distinguish whether the deal is truly motivated by expected synergies or simply an opportunistic attempt to transfer value from the acquirer's existing shareholders to the target’s shareholders?
It is a very good question. We usually assume that the overpricing takes time to correct, while synergies are included immediately. Under this assumption, we can distinguish them. Otherwise, it is very hard,