Estimating potential merger gains with Bilevel Programming DEA

Abstract

In today’s economy and society, merger has a very important role in the restructuring of many sectors. In this thesis, we introduce an innovative Bilevel Programming Data Envelopment Analysis approach to evaluate the profit efficiency of the hierarchical system both pre-merger and post-merger. This hierarchical system consists of two levels, the Leader and the Follower, and the Leader is at the dominant level. A -Strategy is proposed to stimulate the Follower to actively participate and stabilize the hierarchical structure. The potential gains from the merger are decomposed into harmony effect and scale effect. Two case studies are used to illustrate our proposed approach. The results show considerable potential gains from the promising mergers. The concept of coordinated effective merger is also discussed, and it is very important since every member in the system benefits from the merger.