Expert Systems With Applications 249 (2024) 123326

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Expert Systems With Applications

journal homepage: www.elsevier.com/locate/eswa

A novel model for merger analysis and target setting: A CSW-Inverse

DEA approach
Mehdi Soltanifar a, Mojtaba Ghiyasi b, Ali Emrouznejad c, *, Hamid Sharafi d
a
Department of Mathematics, Semnan Branch, Islamic Azad University, Semnan, Iran
b
Faculty of Industrial Engineering and Management Science, Shahrood University of Technology, Shahrood, Iran
c
Surrey Business School, University of Surrey, Guildford, United Kingdom
d
Department of Mathematics, Science and Research Branch, Islamic Azad University, Tehran, Iran

A R T I C L E I N F O A B S T R A C T

Keywords: The inverse data envelopment analysis (DEA) is an advanced complementary method for efficiency analysis using
Data envelopment analysis (DEA) the classical DEA approach. One of the inverse DEA (InvDEA) method applications is the mergers and acquisi­
Common set of weights (CSW) tions problem. It can be used for analyzing any under evaluation mergers and acquisitions. The current article is
Inverse data envelopment analysis (InvDEA)
the first attempt to propose a novel inverse structure for the DEA model using the multiplier forms. This
Goal programming (GP)
eventuates the possibility of incorporating decision maker preferences within the merger analysis.
Moreover, compared with the existing models in the literature, the proposed novel models are capable of
analyzing multiple merger scenarios simultaneously in a single method based on the common set of weights
(CSW) rather than a series of models for studying multiple scenarios of mergers and acquisitions. Practically, this
property enables decision-makers to consider and analyze multiple mergers and find possible potentials at the
same time. The applicability of the proposed model is investigated by using a real-world dataset in banking.

1. Introduction prioritized marketing synergy opportunities based on the proposed or

One of the effective measures in optimizing administrative, financial,
and industrial systems is identifying departments, institutions, organi­
zations, and in other words Decision Making Units (DMU) with similar
services and eliminating the parallel activities of several devices and
entrusting them to one organization. In other words, merging units
could have the potential to improve the overall performance of the
system. (Braguinsky, Ohyama, Okazaki, & Syverson, 2015; Vizcaino-
Gonzalez & Navio-Marco, 2018) There are always many challenges
with Mergers and Acquisitions (M&As) of decision making units. These
include improving performance, eliminating excess capacity, increasing
growth, acquiring skills and technology, encouraging competitive be­
haviors, reducing foreign exchange risk, improving the economic situ­
ation, enjoying tax benefits (tax loss carryforward), operating efficiency,
and the like (Steigenberger, 2017). To achieve these aims, researchers
are always looking to design models for M&As that can be more effective
in boosting profits, saving money, upscaling, and freeing up abundant
resources. One of these efforts is the two-phase model proposed by
Weber and Dholakia (2000). In this model, they identified, valued, and
consummated acquisition. Other efforts to study the improvement of the
M&As process in the banking systems include research conducted by
Bernad, Fuentelsaz, and Gómez (2010) and Asimakopoulos and Atha­
nasoglou (2013). The aim of Bernad et al. (2010) is to evaluate the ef­
fects of mergers and acquisitions on the long-term productivity of
Spanish savings banks. Their results showed that productivity im­
provements were observed in only half of the mergers performed during
the analysis period. Asimakopoulos and Athanasoglou (2013) shed
additional light on the value creation of M&As deals in European banks
and estimated the reaction, and its determinants, of the stock price of
banks to M&As. In banking systems that operate in a network of multiple
branches, there is sometimes a need for merging certain adjacent
branches due to factors such as population decline, bankruptcy of some
manufacturing or service companies, and other strategic considerations.
Alternatively, one branch can acquire and take ownership of another
branch. This merger or acquisition can significantly contribute to the
efficiency and effectiveness of the banking system and, in some cases, is
considered one of the best strategies to mitigate the risk of bankruptcy in
banking systems. By combining the resources and customer bases of

* Corresponding author.
E-mail addresses: soltanifar@khayam.ut.ac.ir (M. Soltanifar), mog@shahroodut.ac.ir (M. Ghiyasi), a.emrouznejad@surrey.ac.uk (A. Emrouznejad), hamid.
sharafi@srbiau.ac.ir (H. Sharafi).

https://doi.org/10.1016/j.eswa.2024.123326
Received 24 April 2022; Received in revised form 26 July 2023; Accepted 22 January 2024
Available online 30 January 2024
0957-4174/© 2024 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
M. Soltanifar et al.
neighboring branches or through the acquisition of one branch by
another, banks can optimize their operations, reduce costs, and improve
overall performance. This interplay between M&A and the banking
sector highlights the strategic importance of M&A activities in the
context of the banking industry.
One of the best and most successful techniques and methods used in
M&As analysis is Data Envelopment Analysis (DEA). DEA has indeed
gained significant recognition as a valuable technique for evaluating the
efficiency and performance of decision-making units, including those
involved in M&As activities. Numerous studies have highlighted the
effectiveness of DEA in assessing the efficiency and synergy potential of
merging entities in various industries, including the banking sector. For
instance, research conducted by Xie, Lu, and Wang (2019) examined the
efficiency of post-M&A banks using DEA and found that DEA can
effectively evaluate the performance of merged banks and identify areas
for potential improvements. Additionally, the work of Avkiran and
Rowlands (2008) provided evidence supporting DEA’s relevance in
M&A decision-making processes by investigating the efficiency gains
from M&As in the Australian banking sector. The authors demonstrated
that DEA can be utilized to analyze the performance of acquiring banks
and identify the most suitable targets for mergers. Furthermore, a
comprehensive review of the literature by Cooper, Seiford, and Tone
(2007) underscores the wide applicability of DEA in M&A analysis
across various industries, including banking. Their study highlighted
that DEA provides a robust framework for evaluating and benchmarking
the performance of different entities, making it a valuable tool in the
M&A decision-making process. The DEA models, including the model
proposed in this study, are applicable not only for analyzing traditional
M&A but also for consolidation analysis. Consolidation analysis in the
banking sector refers to the strategic process of combining multiple
financial institutions to form a larger and more robust entity. Unlike
traditional M&A that involve the transfer of ownership, consolidation
focuses on the integration of operations and resources among banks to
achieve economies of scale, enhance efficiency, and mitigate risks.
While M&A deals often result in the acquisition of one bank by another,
consolidation involves the creation of a new banking entity by merging
several existing banks (Acharya, Amihud, & Litov, 2017; Montgomery,
Harimaya, & Takahashi, 2014). Consolidation analysis complements
traditional M&A analysis in the banking sector by offering a broader
perspective on the long-term implications of merging multiple banks.
While M&A analysis primarily focuses on the short-term financial gains
and potential synergies between the acquiring and target banks,
consolidation analysis takes a more holistic approach, considering the
overall impact of the merger on the banking sector, the economy, and
society (Altunbas, Manganelli, & Marques-Ibanez, 2012). DEA is a de­
cision making tool based on linear programming for measuring the
relative efficiencies of a set of comparable DMUs. DEA is initially
developed by Charnes, Cooper, and Rhodes (1978) (CCR) and then,
Banker, Charnes, and Cooper (1984) (BCC) presented a Variable Returns
to Scale (VRS) version of the CCR model. This model measures technical
efficiency as the convexity constraint ensures that the composite unit is
of similar scale size as the unit being measured. The resulting efficiency
is always at least equal to the one given by the CCR model (assuming
Constant Returns to Scale (CRS)), and those DMUs with the lowest input
or highest output levels are rated efficient. Unlike the CCR model, the
BCC model allows for VRS. Comprehensive and useful information from
DEA can be found at “https://www.DEAzone.com”. As the implication
of global efficiency is twofold within the framework of DEA, and also
since the participants during an M&A naturally care about if the merged
firm can operate in a globally efficient way, DEA is widely used (Farrell,
1957; Yannick, Zhao, & Belinga, 2016). Many researchers have often
used DEA as a tool for post-merger analysis that focuses on the assess­
ment of gain and loss under the observed information. They used merger
analysis by DEA in various fields such as agriculture (Bogetoft & Wang,
2005), healthcare organizations (Kristensen, Bogetoft, & Pedersen,
2010; Leleu, Moises, & Valdmanis, 2012), banking (Du & Sim, 2016;
2
Expert Systems With Applications 249 (2024) 123326
Hahn, 2007; Luo, 2003; Moradi-Motlagh & Babacan, 2015; Sherman &
Rupert, 2006; Wheelock & Wilson, 2000; Wu & Birge, 2012; Wu et al.,
2011, 2016), non-bank institutions like credit units (Fried, KnoxLovell,
& Yaisawarng, 1999; Halkos, Matousek, & Tzeremes, 2016; Jin, Xia, Li,
Li, & Skitmore, 2015; Worthington, 2004), airlines (Kong, Chow, Ka, &
Fung, 2012), and forestry (Bogetoft, Thorsen, & Strange, 2003).
Conversely, some researchers attempted to use Inverse DEA (InvDEA)
instead of DEA for pre-merger analysis. InvDEA was first developed by
Wei, Zhang, and Zhang (2000). In contrast to traditional DEA models,
the InvDEA assumes relative efficiency as a parameter and determines
the best possible inputs (or outputs) that are required to achieve the
efficiency target. This reversed technique is a useful managerial tool in
dealing with problems such as investment optimization (Chen, Wang,
Lai, & Feng, 2017), resource allocation (Hadi-Vencheh, Foroughi, &
Soleimani-Damaneh, 2008), and production prediction (Lin, Yan, &
Wang, 2019).
Sayar, Ghiyasi, and Fathali (2021) proposed new InvDEA models for
the budgeting and planning process of production units. Soltanifar,
Ghiyasi, and Sharafi (2022) made the first attempt on considering ration
based data in the inverse DEA literature and then proposed an inverse
DEA-R method. Ghiyasi, Soltanifar, and Sharafi (2022) proposed an
inverse DEA-R method for performance measurements of healthcare
systems, specifically hospitals. Mahla, Agarwal, Amin, and Mathur
(2023) considered the preferences of decision-makers in the ratio based
InvDEA models. Kazemi and Galagedera (2023) investigated the inter­
mediate measure and proposed an inverse DEA model for serially linked
general two-stage processes. Gerami, Mozaffari, Wanke, and Correa
(2023) considered the value efficiency measure and proposed a gener­
alized InvDEA model for firm restructuring. Recently, Emrouznejad,
Amin, Ghiyasi, and Michali (2023) provide a literature review of the
theoretical developments and application of the InvDEA model. Readers
are referred to this review paper for a comprehensive literature review
of the inverse DEA models.
The use of InvDEA in merger analysis is not widespread. Gattoufi,
Amin, and Emrouznejad (2014) developed an InvDEA method for
merger analysis in the banking industry. Amin and Oukil (2019)
addressed a new InvDEA model with a flexible target setting and applied
this model to university merger practices. Emrouznejad, Yang, and Amin
(2019) proposed an InvDEA model for CO2 emission reduction in
manufacturing. In another study, Amin, Emrouznejad, and Gattoufi
(2017b), Amin, Al-Muharrami, and Toloo (2019) combined the goal
programming method with models presented by Gattoufi et al. (2014).
Also in the paper presented by Lin, Wang, and Shi (2020), a major
contribution and novelty is that they develop a new approach by
combining InvDEA with return to scale (RTS) measurement to obtain the
matching degree and present a streamlined approach for M&A decision.
Amin, Emrouznejad, and Gattoufi (2017a) provided an InvDEA struc­
ture for determining minor and major consolidation. Amin et al.,
(2017b) proposed a generalized framework for firm restructuring using
InvDEA models. Amin and Ibn Boamah (2020) considered the price in­
formation in the process of merger analysis using InvDEA models. Amin
and Ibn Boamah (2021) proposed an InvDEA structure for the estimation
of potential gains from the merger in two-stage process.
Based on the extensive research conducted in the field of M&A, we
have conducted a comprehensive review of the existing literature,
leading to the identification of a crucial area that requires further
exploration: the utilization of DEA within the context of M&A. As pio­
neers in this endeavor, our study introduces a novel CSW-Inverse DEA
Approach, aimed at tackling the intricacies of M&A decision-making
while accommodating decision maker preferences. As a result, our
research makes a significant and valuable contribution to the current
body of knowledge in the field of M&A analysis. In this paper, we study
M&A analysis with a model design based on the multiplier form of
classical DEA models. We use the definition of relative efficiency and
apply the fractional model presented in the evaluation of relative effi­
ciency. Then we implement the merger analysis on the fractional model
M. Soltanifar et al. Expert Systems With Applications 249 (2024) 123326

and calculate the inputs and outputs of the merged unit by providing a
∑
s
predetermined target for the efficiency of the merged unit. Using the *
Eoo = max ūro yro
Goal Programming (GP) method and setting the goal equal to pre- r=1

merger efficiency for other units will lead us to a linear programming s.t.
model. Finally, by generalizing the same idea, we present a linear pro­ ∑m
v̄io xio = 1
gramming model that is able to analyze merging for a combination of i=1 (2)
several different mergers simultaneously in a single model. The pro­ ∑
s ∑
m
posed models for both CRS and VRS assumptions are presented. ūro yrj − v̄io xij ⩽0, j ∈ {1, 2, …, n}
The rest of this paper is organized as follows. In Section 2, while r=1 i=1

recalling the literature on the multiplicative form of the basic DEA ūro ⩾ε̄ > 0, r ∈ {1, 2, …, s}
models, first a new model for merging two units with the GP approach is v̄io ⩾ε̄ > 0, i ∈ {1, 2, …, m}
presented and then this concept is generalized for merger analysis in the
presence of a combination of several different mergers. In Section 3, we What is certain is that model (1) must be solved n times to evaluate n
improve the models presented in Section 2 with some modifications to DMUs. Model (1) also evaluates each DMU through the best weights, so
consider multiple mergers simultaneously. In Section 4, a case study is the weights of inputs and outputs in evaluating each DMU may be
conducted to demonstrate the applicability of the proposed models. In different. To resolve this problem and obtain only one CSW for all DMUs
Section 5, we aim to provide managerial implications and explore the and evaluate all DMUs based on one CSW, the CSW model can be pre­
integration of the research findings with expert systems. Section 6 sented as follows (Jahanshahloo, Memariani, Hosseinzadeh Lotfi, and
summarizes the paper and provides direction for future research. Rezai (2005):
{∑s }
ur yrj
2. New merger model based on a common set of weights (CSW) max ∑r=1m
i=1 vi xij j∈{1,2,...,n}

In this section, we propose a merger model based on the multiplier s.t.

form and CSW of DEA models. This enables us to consider and advan­ ∑
s
uro yrj
tages of this form compared with existing models in the literature yields r=1 (3)
⩽1, j ∈ {1, 2, …, n}
other theoretical developments and empirical capability in the next ∑m
vio xij
section. i=1

uro ⩾ε > 0, r ∈ {1, 2, …, s}

2.1. Merger analysis and target setting
vio ⩾ε > 0, i ∈ {1, 2, …, m}
Assume that a set of n congruent DMUs is available with m inputs and
Model (3), which can be turned into a linear programming problem
s outputs. Also assume that for a given DMUj (j = 1, 2, …, n), xij , (i = 1,
by using various solving methods, can evaluate DMUs only by solving
2…m) is the i-th input value and yrj , (r = 1, 2…s) is the r-the output
one model. A comprehensive study of various CSW models can be found
value. We begin by introducing the Charnes, Cooper, and Rhodes (CCR)
in Soltanifar (2011). In the following, we intend to use the features of
(Charnes et al., 1978; Charnes et al., 1979; Charnes et al., 1981) ratio
this model to study M&A analysis in DEA.
form of DEA model (1).
Now suppose, according to the set policy, the DMUs h and k must
∑
s merge to form the new entity M. Thus, this DMU aims to produce the
uro yro
* maximum output level βh +βk with the minimum level of input αh + αk .
Eoo = max r=1
∑m
One of the main purposes of the merger is to maximize the performance
vio xio
i=1 vector of the system under evaluation with n-1 DMUs. To achieve this
s.t. purpose, a nonlinear multi-objective model (4) is proposed.
{∑s }
∑ (1)
s
ur yrj
uro yrj max ∑r=1 m
r=1
⩽1, j ∈ {1, 2, …, n} i=1 vi xij j∈{1,2,...,n}− {h,k}
∑m
∑s
vio xij ur (βrh + βrk )
i=1 max ∑r=1
m
i=1 vi (αih + αik )
uro ⩾ε > 0, r ∈ {1, 2, …, s}
s.t.
uio ⩾ε > 0, i ∈ {1, 2, …, m} ∑s
ur yrj
∑r=1 ⩽1, j ∈ {1, 2, ..., n} − {h, k}
Model (1) is designed to evaluate the relative performance of some m
i=1 vi xij
(4)
DMU, designated as DMUo, based on the observed performance of (j = 1, ∑s
ur (βrh + βrk )
2, …, n) DMUs. A DMU is to be regarded as an entity responsible for ∑r=1m ⩽1
converting inputs into outputs. The ε > 0 in model (1) represents a non- i=1 vi (αih + αik )

Archimedean constant which is smaller than any positive valued real 0⩽αih + αik ⩽xih + xik , i ∈ {1, 2, ..., m}
number. In practice, this non-Archimedean concept is handled by the
0⩽yrh + yrk ⩽βrh + βrk , r ∈ {1, 2, ..., s}
DEA computer software used. Hence, it need not be specified explicitly.
The theory of fractional programming, as first given in Charnes and vi ⩾ε > 0, i ∈ {1, 2, ..., m}
Cooper (1962), makes it possible to replace model (1) with an equivalent
ur ⩾ε > 0, r ∈ {1, 2, ..., s}
linear programming problem. The transformation to accomplish this can
be found in Charnes et al. (1978). After transformation as ∑m 1 =t By assuming the merged entity M falls inside the pre-merger Pro­
v x
i=1 io io
duction Possibility Set (PPS), PPS does not change in the merger process.
and let v̄ = tv, ū = tu, then we can express model (1) as model (2). Here
Therefore, the goal of the first objective function in model (4) is reaching
we simply present the results of the transformation in the model (2).
E*jj , the efficiency levels based on model (1). Because the units are rated
according to DEA policy in the best condition compared to other DMUs.
Note that, if the PPS changes during the merging process, then E*jj not

3
M. Soltanifar et al. Expert Systems With Applications 249 (2024) 123326

necessarily be a suitable goal for the first objective functions. It should

∑
s ∑
m
be noted that the observed data set the playing field, which has to be *
ur (βrh + βrk ) − EM vi (αih + αik ) + d′M = 0
respected, and the assumption that the merged entity M falls inside the r=1 i=1

pre-merger PPS, is to comply with this rule. If the decision maker pro­ Thus, model (5) can be converted into the following non-linear
poses an efficiency target equal to E*M for the merged unit and this target programming problem model.
is considered as the goal for the second objective function, we can ∑
present the model (5), based on GP approach (Steuer, 1986) to solve the Min dj
⋃
model (4). Variables dj , j ∈ {1, 2, ..., n} − {h, k} and dM are also devia­ j∈({1,2,...,n}− {h,k} ) {M}

tional variables from the goals in the objective functions. s.t.

∑ ∑ s ∑
m
Min dj ur yrj − Ejj* vi xij + dj = 0, j ∈ {1, 2, ..., n} − {h, k} (6.1)
⋃
j∈({1,2,...,n}− {h,k} ) {M} r=1 i=1
∑
s ∑
m
*
s.t. ur (βrh + βrk ) − EM vi (αih + αik ) + d′M = 0 (6.2)
∑s r=1 i=1
ur yrj
∑r=1m ⩽1, j ∈ {1, 2, ..., n} − {h, k} (5.1) 0⩽αih + αik ⩽xih + xik , i ∈ {1, 2, ..., m} (6.3)
i=1 vi xij
∑s 0⩽yrh + yrk ⩽βrh + βrk , r ∈ {1, 2, ..., s} (6.4)
ur (βrh + βrk ) ⋃
∑r=1m ⩽1 (5.2) dj ⩾0, j ∈ ({1, 2, ..., n} − {h, k} ) {M}
i=1 vi (αih + αik )
∑s vi ⩾ε > 0, i ∈ {1, 2, ..., m}
ur yrj
∑r=1 + dj = Ejj* , j ∈ {1, 2, ..., n} − {h, k} (5.3)
(5) ur ⩾ε > 0, r ∈ {1, 2, ..., s}
m
i=1 vi xij
∑s (6)
ur (βrh + βrk ) *
∑r=1 + dM = EM (5.4)
m
i=1 vi (αih + αik )
The constraint set of (6.2) still contains some non-linear terms. By
⋃ multiplying the constraints (6.3) αih +αik ⩽xih +xik , i = 1, 2, ..., m by
dj ⩾0, j ∈ ({1, 2, ..., n} − {h, k} ) {M} ur (note that ur > 0) and yrh +yrk ⩽βrh +βrk , r = 1, 2, ..., s by vi (note that
0⩽αih + αik ⩽xih + xik , i ∈ {1, 2, ..., m} vi > 0), and changing variables vi (αih + αik ) = ̂ v i , i = 1, 2, ..., m and
ur (βrh + βrk ) = ̂
u r , r = 1, 2, ..., s, model (6) can be converted to the
0⩽yrh + yrk ⩽βrh + βrk , r ∈ {1, 2, ..., s} following linear programming model.
vi ⩾ε > 0, i ∈ {1, 2, ..., m} ∑
Min dj
⋃
ur ⩾ε > 0, r ∈ {1, 2, ..., s} j∈({1,2,...,n}− {h,k} ) {M}

s.t.
2.2. Linearization of the proposed models ∑ s ∑
m
ur yrj − Ejj* vi xij + dj = 0, j ∈ {1, 2, ..., n} − {h, k}
r=1 i=1
Model (5), is a single objective, but fractional nonlinear program­
∑
s ∑
m
ming problem. Consider the constraint set of (5.3) and (5.4); since dj ⩾0, ̂ *
u r − EM v i + dM = 0
̂
⋃ (7)
j ∈ ({1, 2, ..., n} − {h, k} ) {M}, then these constraints can be presented r=1 i=1
⋃
as (5.3)’ and (5.4)’. dj ⩾0, j ∈ ({1, 2, ..., n} − {h, k} ) {M}
∑s
ur yrj * v i ⩽vi (xih + xik ), i ∈ {1, 2, ..., m}
0⩽̂
∑r=1
m ⩽Ejj , j ∈ {1, 2, ..., n} − {h, k} (5.3)
i=1 vi xij 0⩽ur (yrh + yrk )⩽̂
u r , r ∈ {1, 2, ..., s}
∑s vi ⩾ε > 0, i ∈ {1, 2, ..., m}
ur (βrh + βrk ) *
∑r=1
m ⩽EM (5.4) ur ⩾ε > 0, r ∈ {1, 2, ..., s}
i=1 vi (αih + αik )

On the other hand, we know that E*jj , E*M ⩽1, j ∈ {1, 2, ..., n} − {h, k} .
This shows that the constraint sets of (5.1) and (5.2) can be gained by the Theorem 1. The nonlinear multi-objective model (4) can be converted to a
constraint sets of (5.3) and (5.4). This implies that the constraint sets of linear programming model (7).
(5.1) and (5.2) are redundant.
Proof. The proof is the result of the above explanations in converting
Consider the constraint sets of (5.3) and (5.4) that can be written as
model (4) to model (7). □.
(5.3)’’ and (5.4)’’.
∑
s ∑
m ∑
m
3. Multiple mergers and alternative solutions
ur yrj + dj vi xij − Ejj* vi xij = 0, j ∈ {1, 2, ..., n} − {h, k} (5.3)
r=1 i=1 i=1
The CSW approach provides a general framework for the estimation
∑
s ∑
m ∑
m of the efficiency level of all DMUs in a single model. Thus, in this section,
ur (βrh + βrk ) + dM vi (αih + αik ) − *
EM vi (αih + αik ) = 0 (5.4) we use this characteristic and we propose a CSW-based model for the
merger analysis that performs the merger investigation of multiple
r=1 i=1 i=1
∑
Considering the variable’s change of dj m i=1 vi xij = dj
′ and mergers in a single model. It also enabled us to incorporate the decision-
∑m
dM i=1 vi (αih + αik ) = dM , we reach the following set of constraints for
′ maker’s preferences in this procedure. In the end, we deal with existence
(5.3) and (5.4): of the alternative solutions.

∑
s ∑
m
ur yrj − Ejj* vi xij + d′j = 0, j ∈ {1, 2, ..., n} − {h, k} 3.1. Multiple simultaneous mergers and incorporation of decision maker’s
r=1 i=1 preferences

Model (7) has the feature that by changing its objective function
∑ { ( )}
from j∈({1,2,...,n}− {h,k} )⋃{M} dj to Pj dj j∈({1,2,...,n}− {h,k} )⋃{M} where Pj ,

4
M. Soltanifar et al. Expert Systems With Applications 249 (2024) 123326

⋃
j ∈ ({1, 2, ..., n} − {h, k} ) {M} are the priorities for realizing the goals, 3.2. Dealing with the alternative solutions
it allows more interaction with the Decision Maker (DM). In the
following, we want to expand model (7) so that it can perform merger The efficiency scores obtained for DMUs from model (2) are in fact
analysis for multiple mergers simultaneously. Suppose a new policy is the scores obtained from the evaluation of these units in the best eval­
adopted in an organization in which several categories of DMUs are uation conditions. Therefore, in terms of evaluating DMUs with CSW,
selected for merger. The merged entities in this process will be called M1 , these scores can be considered goals. What is clear in models (8) and (9)
M2 ,...,Mp . These entities can be the result of merging two or more DMUs. is that the best efficiency scores of units that do not participate in the
Model (8) can be presented for merger analysis in such a problem. It is merger are considered goals. In these models, the targets of merged
worth pointing out that the merger may be done by multiple units, in units, due to the use of a CSW for evaluation, may not necessarily be
order to reach prior goals like market share, higher productivity, etc,. achieved; so we consider these targets as goals. Models (8) and (9) use
For instance, seven Chinese state-owned mobile communications busi­ the concept of goal programming to provide a weight according to
nesses were merged and acquired by China Mobile in 2000. which the efficiency of the units is closer to their goals.
{ ( )} Models (8) and (9) may have multiple optimal solutions. Therefore,
Min Pj dj j∈F the solution obtained by solving the models may only result in achieving
s.t. the set goal for the merged units by reducing the limited number of
∑ s ∑
m
inputs or increasing the limited number of outputs. This may make
ur yrj − Ejj* vi xij + dj = 0, j ∈ F′
r=1 i=1
target setting inapplicable. We proposed a suitable target that can be
∑
s ∑
m achieved through goal programming and prioritization for deviational
uM
̂ t *
r − EMt ̂v Mt
i + dMt = 0, t ∈ {1, 2, ..., p}
variables, but proper distribution in reducing inputs and increasing
r=1 i=1 outputs is our purpose. The proposed method considers the inputs and
dj ⩾0, j ∈ F (8) outputs values for each category of DMUs, and since the target setting is
∑
0⩽̂v M t based on maximizing the efficiency vector of DMUs in a CSW model, this
i ⩽vi xih , i ∈ {1, 2, ..., m}, t ∈ {1, 2, ..., p}
h∈Mt in some cases causes irrational changes in inputs and outputs. In other
∑ words, the proposed values for the inputs and outputs of the merged unit
0⩽ur uM
yrh ⩽̂ t
r , r ∈ {1, 2, ..., s}, t ∈ {1, 2, ..., p}
h∈Mt
should be based on its capacity and policies. For this purpose and in
order to determine the target in a logical and implementable way, two
vi ⩾ε > 0, i ∈ {1, 2, ..., m}
constraints (10) and (11) are proposed. In fact, these two constraints
ur ⩾ε > 0, r ∈ {1, 2, ..., s} control the amount of change in inputs and outputs.
Where F is the set of available peers in the post-merger evaluation (
∑
)
process, F′ is the set of DMUs not involved in the merger process, E*jj is the vM
̂ i
t
⩾η Mt
Input xih vi , i ∈ {1, 2, ..., m}, t ∈ {1, 2, ..., p} (10)
efficiency performance of the units in the set of F′, pre-merger and E*Mt is
h∈Mt

the decision-maker’s target for the merged entity Mt , t ∈ {1, 2, ..., p}. (
∑
)
Thus, in a process with multiple merging, the input and output targets of uM
̂ Mt
r ⩾ηOutput
t
yrh ur , r ∈ {1, 2, ..., s}, t ∈ {1, 2, ..., p} (11)
the merged entities can be obtained by solving a single model with a h∈Mt

specific efficiency target. Also, the existence of different priorities to

minimize deviational variables allows the decision maker to manage the Values ηM Mt
Input and ηOutput are determined after interacting with the deci­
t

obtained goals based on the degree of priority of achieving each goal. sion maker and considering merging policies. Usually ηM
Input ⩽1 and
t

Theorem 2. Model (8) is feasible if the post-merger PPS and the pre- ηM
Output ⩾1. In this way, it will be possible to achieve logical targets for the
t

merger PPS are the same. merged units and the flexibility of the models in the merging process will
increase. Thus, in models (8) and (9), it is possible to provide achievable
Proof. The feasibility of model (8), if the PPS remains unchanged
and practical targets by interacting more with the DM. It should be noted
after the merger, is the direct result of the feasibility of model (2) for the
that the interaction with the DM in determining the priorities of
units in the pre-merger PPS, and this end of the proof.
deviational variables and taking advantage of goal programming is one
The new models presented so far have been presented on the CRS
of the benefits of the models presented in this paper. In the next section,
assumption. Implementation of this idea to achieve a model for merger
to show the applicability of the proposed models and also its superiority
analysis with VRS is given in the modified Model (9).
over previous models, we will implement it on real-world data.
{ ( )}
Min Pj dj j∈F Developed theories in the current section help decision makers in
preferred target setting and incorporating their desires in the process of
s.t.
∑ s ∑
m merger analysis. It is also possible to perform multiple merger analyses
ur yrj + u − Ejj* vi xij + dj = 0, j ∈ F′ simultaneously to find the possible potential of mergers. This helps de­
r=1 i=1 cision makers to find an overall optimal merger strategy for the whole
∑
s
*
∑
m
system.
uM
̂ t
r + u − EMt ̂v Mt
i + dMt = 0, t ∈ {1, 2, ..., p}
r=1 i=1
4. A real application in banking
dj ⩾0, j ∈ F (9)
∑
0⩽̂v M t
i ⩽vi xih , i ∈ {1, 2, ..., m}, t ∈ {1, 2, ..., p} In this section, we use the data set presented by Gattoufi et al. (2014)
∑
h∈Mt
to demonstrate the applicability of the proposed models. This data was
0⩽ur uM
yrh ⩽̂ t
r , r ∈ {1, 2, ..., s}, t ∈ {1, 2, ..., p} also used by Amin et al. (2019). This data set consists of banks operating
h∈Mt in the GCC countries. The council is a political and economic union
vi ⩾ε > 0, i ∈ {1, 2, ..., m} comprising six countries in the Persian Gulf: the United Arab Emirates,
ur ⩾ε > 0, r ∈ {1, 2, ..., s} Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain. There are 42 branches
in the Persian Gulf Cooperation Council Bank that generate interest in­
u is free
come (O1 ) and non-interest income (O2 ) with two inputs, interest ex­
penses (I1 ) and non-interest expenses (I2 ). Table 1 reports the statistical

5
M. Soltanifar et al. Expert Systems With Applications 249 (2024) 123326

Table 1
Statistical summary of input–output data.
Statistical Parameters Input 1 Input 2 Output 1 Output 2

Max 7,994.80804 8,486.424885 27,514.03279 15,716.89339

Min 1.0179 1.2818 3.0537 0.377
Mean 1,933.8664548 1,371.8909491 4,704.5202933 3,694.5271678
Median 591.1123296 600.8508915 1,468.8691215 1,825.704727
Variance 5405659.791 3500588.665 38649827.43 19785008.24
Standard Deviation 2325.007482 1870.986014 6216.898538 4448.034199
Scattering Coefficient 83.1767842 73.3244898 75.6731072 83.0597743

Table 2
Merging banks B2 and B3 based on InvDEA model (Gattoufi et al., 2014).
Target Input oriented Target Output oriented

I1 I2 O1 O2 I1 I2 O1 O2

0.7 745.8131 458.5765 1454.654397 849.9262586 1.42857 786.4388026 458.5765 1454.654 1064.106059
0.75 653.1015 458.5765 1454.654397 849.9262586 1.3 786.4388026 458.5765 1454.654 2149.695259
0.8 571.9788 458.5765 1454.654397 849.9262586 1.25 786.4388026 458.5765 1491.115 2287.527259
0.9 436.7745 458.5765 1454.654397 849.9262586 1.1111 786.4388026 458.5765 1677.521 2573.494259
1 371.27 428.2365 1454.654397 849.9262586 1 786.4388026 458.5765 1863.894 2859.406259

Table 3 Table 4
Merging banks B2 and B3 based on CSW-InvDEA model (8). Merging banks B2 and B3 based on the modified CSW-InvDEA model (8).
Target I1 I2 O1 O2 Target I1 I2 O1 O2

0.7 786.4388026 458.5764807 1925.622013 849.9262586 0.7 667.2705529 261.388594 1454.654397 849.9262586
0.75 786.4388026 458.5764807 2055.680339 849.9262586 0.75 786.4388026 261.388594 1732.962855 849.9262586
0.8 786.4388026 458.5764807 2185.738665 849.9262586 0.8 786.4388026 261.388594 1841.506682 849.9262586
0.9 786.4388026 458.5764807 2445.855316 849.9262586 0.9 786.4388026 261.388594 1759.417043 1563.864316
1 786.4388026 458.5764807 2705.971967 849.9262586 1 530.0155981 261.388594 1454.654397 1563.864316

summary of the data set for 42 branches of GCC bank. The data as well as
the efficiency evaluation of the branches are given in Appendix Table
A1.
Gattoufi et al. (2014) considered the second and third bank branches
for integration. For different targets, they proposed the inputs and
outputs of the merged unit through two input-oriented and output-
oriented models. Table 2 shows the inputs and outputs of the merged
unit based on two input-oriented and output-oriented models for
different targets.
Amin et al. (2019) also with a target equal to 1, attempted target
setting through their goal programming models in the merging of the
second and third bank branches. The inputs and outputs of the merged
unit are based on the input-oriented and output-oriented models pre­
sented by them as (356.06953, 443.4408, 1454.654397, 849.9262586)
and (786.4388026, 458.5764807, 2091.227297, 1328.735559). Now,
increase in the first output are suggested simultaneously and therefore
make the final targets more logical and practical.
Suppose we want to increase the number of units merged in this case
study. For example, suppose the second and third branches should be
merged together and the eighth and ninth branches should be merged
together. In this case, based on the models presented by Gattoufi et al.
(2014) as well as models presented by Amin et al. (2019), these two
mergers should be studied separately or one after the other. But based on
the models presented in this paper, we can study this simultaneously by
considering a target for each merger. For example, if the efficiency target
is 0.68 for the unit resulting from the merger of the second and third
branches and also the efficiency target is 0.74 for the unit resulting from
the merger of the eighth and ninth branches, the inputs and outputs
values of the units merged according to model (9) are given in Table 5.
Also, if we add constraints (10) and (11) with ηM Input = 0.57 and
t

if we want to target setting based on different targets with the CSW-

ηM
Output = 1.84 to model (9), target setting will result as in Table 6.
t

InvDEA model (9), the results of Table 3 will be obtained. In this

It should be noted that the efficiency targets considered in the merger
model, for estimating the inputs and outputs of the merged unit,
process in Table 6 are the same as the efficiency targets considered in
reduction of inputs and increase of outputs simultaneously will be
Table 5 for the merged units. Advantage the possibility of simulta­
considered as a strategy.
neously examining several merged units for the models presented in this
The targets obtained from model (9) only suggest an increase in the
paper is not limited. For example, if we want to merge the second and
first output. The inputs and the second output are equal to the sum of the
third branches together, the eighth and ninth branches together, and the
inputs and the second output of the units participating in the merger.
seventeenth and nineteenth branches together, and the performance
Due to the type of input in banks, which is a kind of current bank costs
targets of the merged units are 0.68, 0.74, and 0.79, respectively; the
and interest paid, the merged branch cannot make changes in these costs
values presented in Table 7 can be obtained after the implementation of
regardless of the capacity of the number of customers and the bank’s
capital. In this case, it is suggested that the target of inputs in the DMU model (9) and also modified model (9) with ηM Mt
Input = 0.57 and ηOutput =
t

after the merger be at least 57 % of the total inputs of the DMUs.

Similarly, the output target of the DMU after the merger is a maximum of
Table 5
184 % of the total output of the DMUs. That is, in constraints (10) and
Merging based on CSW-InvDEA model (8).
(11) ηM Mt
Input = 0.57 and ηOutput = 1.84. Adding these constraints to model
t

Branches I1 I2 O1 O2
(9) gives the results of Table 4.
B2&B3 786.4388026 458.5764807 1873.598683 849.9262586
In the targets proposed in Table 4, a decrease in inputs and an
B8&B9 26.4006406 23.4413304 525.9787242 30.0717914

6
M. Soltanifar et al. Expert Systems With Applications 249 (2024) 123326

Table 6 banks in making strategic decisions that align with their long-term goals
Merging based on modified CSW-InvDEA model (8). and objectives. In conclusion, our study not only presents a novel CSW-
Branches I1 I2 O1 O2 Inverse DEA Approach for M&A analysis but also provides valuable
managerial implications and insights for decision-makers in the banking
B2&B3 695.1394383 261.388594 1454.654397 849.9262586
B8&B9 15.0483651 13.3615583 124.4038963 55.3320962 sector. The potential integration with expert systems offers a promising
avenue for improving the practical applicability of our model in real-

Table 7
Merging based on model (9) and modified model (9).
Model (9)

Branches I1 I2 O1 O2

B2&B3 786.4388026 458.5764807 1874.045322 849.9262586

B8&B9 26.4006406 23.4413304 526.2586923 30.0717914
B17&B19 5292.377578 3894.976699 11336.87758 10378.45143

Modified model (9)

Branches I1 I2 O1 O2
B2&B3 694.9990095 261.388594 1454.654397 849.9262586
B8&B9 15.0483651 13.3615583 124.4038963 55.3320962
B17&B19 5292.377578 3894.976699 11336.87758 10378.45143

1.84.
Thus, in this paper, we present a process for merger analysis that,
firstly, allows one model to examine multiple mergers, and secondly, by
adding constraints (10) and (11), allows the final target to be applicable.
The proposed model also provides the possibility of interacting with the
DM in determining the priority for deviational variables by taking
advantage of goal programming.
5. Managerial implications and integration with expert systems
In this section, we discuss the managerial implications of our pro­
posed CSW-Inverse DEA Approach for merger analysis and target setting
in the context of the banking sector. We also explore the potential
integration of our model with expert systems to enhance decision-
making processes in real-world scenarios. Our novel CSW-Inverse DEA
Approach offers valuable insights for decision-makers in the banking
industry facing mergers and acquisitions challenges. By considering the
specific needs and preferences of decision-makers, the proposed model
enables efficient evaluation and selection of potential merger targets,
leading to enhanced decision-making processes. The incorporation of
the common set of weights (CSW) allows decision-makers to simulta­
neously analyze multiple merger scenarios, facilitating a comprehensive
understanding of the potential outcomes of different merger combina­
tions. Furthermore, the CSW-Inverse DEA Approach provides decision-
makers with a systematic framework to address complexities and un­
certainties involved in the M&A decision-making process. This can result
in more informed and well-justified decisions, leading to improved
performance and strategic advantages for the participating banks. To
further enhance the practical applicability of our proposed model, we
explore the potential integration of the CSW-Inverse DEA Approach with
expert systems. Expert systems are knowledge-based software tools that
mimic human decision-making processes and provide valuable domain-
specific insights. The integration of our model with expert systems can
result in a more robust and sophisticated decision support system for
mergers and acquisitions in the banking sector. Expert systems can
contribute domain expertise, market intelligence, and contextual
knowledge to supplement the quantitative analysis provided by our
CSW-Inverse DEA Approach. By combining the strengths of both ap­
proaches, decision-makers can benefit from a comprehensive and well-
informed decision-making process that accounts for both quantitative
efficiency measures and qualitative expert insights. Overall, the inte­
gration of our model with expert systems can lead to more accurate,
efficient, and effective merger analysis and target setting, supporting
world scenarios. We believe that the managerial implications and the
integration with expert systems discussed in this section further rein­
force the significance and relevance of our research in the field of
mergers and acquisitions. These findings contribute to the extant liter­
ature and offer practical guidance for decision-makers in the banking
industry.
6. Conclusion
Inverse DEA models can be used as a useful tool for analyzing
mergers and acquisitions, considering the performance of the produc­
tion units. However, we need to perform an inverse DEA model for any
merger and acquisition that is under study, using the existing models in
the literature. The current article tackles this issue using CSW DEA
methods. The current paper is the first attempt on dealing with the
merger analysis via the multiplier form of DEA and CSW models. This
provides the possibility of further development as follows. We proposed
a model that can consider and analyzes multiple merger scenarios
simultaneously. It is also possible to incorporate the desires of decision-
makers in the process of merger analysis. The existence of multiple
optimal solutions is also discussed. As mentioned before, the current
paper is the first work dealing with merger analysis. Thus, other possi­
bilities of the multiplier form like general weigh restrictions, assurance
region, etc. can be potential research lines for future studies.
CRediT authorship contribution statement
Mehdi Soltanifar: Data curation, Formal analysis, Investigation,
Validation, Writing – original draft. Mojtaba Ghiyasi: Conceptualiza­
tion, Formal analysis, Methodology, Software, Supervision, Validation,
Writing – original draft. Ali Emrouznejad: Conceptualization, Meth­
odology, Supervision, Writing – original draft. Hamid Sharafi: Funding
acquisition, Investigation, Writing – original draft.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
Data is included in teh manmuscript

7
M. Soltanifar et al. Expert Systems With Applications 249 (2024) 123326

Appendix A

Table A1. GCC banks data and efficiency scores under the VRS assumption (Source:Gattoufi et al., 2014).

Bank Interest Expenses Non-Interest expenses Interest Incomes Non-Interest Incomes Efficiency scores

B1 3956.796054 1894.425900 9001.003600 8701.496886 1

B2 481.238803 319.976481 974.854397 597.726259 0.6773624
B3 305.200000 138.600000 479.800000 252.200000 0.6400317
B4 4710.680232 3996.258941 12920.337180 6060.767712 0.8924873
B5 1.017900 1.281800 3.053700 0.377000 1
B6 954.436844 1208.703319 1991.004009 7278.096590 1
B7 3.965387 5.081855 13.359118 3.002914 0.8285524
B8 14.629582 16.862518 44.658724 14.937573 0.7377412
B9 11.771059 6.578812 22.952089 15.134218 0.7266765
B10 364.920450 244.750271 923.509658 1942.934962 1
B11 4897.442334 2787.180598 11294.606840 9363.231698 0.9386614
B12 14.665300 8.972600 28.124200 10.970700 0.6690154
B13 6.077288 14.249176 26.993781 10.207484 0.9701227
B14 397.627318 371.535322 894.845212 1902.878236 0.8128866
B15 661.119727 830.166461 2325.127578 1748.531218 0.9526476
B16 12.125075 7.345849 33.572593 19.529927 0.9621334
B17 1222.026218 1049.479174 2959.509429 2651.545717 0.7844912
B18 931.171601 838.345660 2460.797508 2765.485010 0.8661025
B19 4070.351360 2845.497525 8377.368148 7726.905715 0.7696454
B20 3721.233105 858.463414 6953.700654 2779.716296 1
B21 16.137266 7.080336 40.770935 22.126050 1
B22 150.705646 132.504481 538.754484 129.956318 1
B23 3857.940464 2894.374080 7439.526268 10239.087180 0.9102697
B24 7994.808040 2286.908317 14156.194000 11261.819920 1
B25 9.688900 6.974500 22.431500 6.032000 0.7557073
B26 3292.736384 1953.592256 7041.163964 3323.973281 0.8263895
B26 402.772218 321.188795 906.237491 775.777512 0.6776949
B28 32.835058 21.536022 97.679135 26.551260 0.9796544
B29 6.737308 7.853776 18.402474 4.504371 0.6869731
B30 531.394733 922.039686 1672.092695 1185.164603 0.8150286
B31 152.509554 190.361322 685.374259 769.897626 1
B32 1.924945 4.581369 9.162738 5.274349 1
B33 4.889360 6.737308 17.401503 5.081855 0.8376516
B34 3233.618974 2527.413772 7959.733478 4684.615848 0.836502
B35 5169.709976 5405.975285 15189.609220 9830.136952 0.8710944
B36 6802.565778 5608.863431 19958.043200 15716.893390 1
B37 3111.951641 2126.012757 6895.571804 4869.315511 0.8113359
B38 3600.983329 1319.710512 6547.924278 5116.081501 0.8762534
B39 7781.754225 8486.424885 27514.032790 14335.678890 1
B40 4488.665847 4531.418617 12157.912780 12380.677220 1
B41 3188.735893 1106.153629 5727.009354 6194.460322 1
B42 650.829926 307.959050 1265.645548 441.358973 0.7787445

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Further reading
Hosseinzadeh Lotfi, F., Hatami-Marbini, A., Agrell, P., Aghayi, A., & Gholami, K. (2013).
Allocating fixed resources and setting targets using a common-weights DEA
approach. Computers & Industrial Engineering, 64, 631–640.
Liu, F.-H.-F., & Peng, H. H. (2008). Ranking of units on the DEA frontier with common
weights. Computers & Operations Research, 35, 1624–1637.