US investors in American photonics and high-tech companies are likely to get more return from a merger if the buyer is a foreign company. That was the surprise finding from a study carried out at the University of Illinois' business school. The study set out to put a yardstick to the vaunted goal of synergy and to measure how much value managers actually create from the synergy of their acquisitions. To put a dollar value on synergy, the study examined 100 takeovers of US firms by foreign companies between 1981 and 1990. It compared the amount of shareholder value created in the merger, the distribution of gains and how bidding competition affected values. In this sample, managers did indeed create value. In 74 takeovers, the combined firm gained an average of $249 million, or 7.6 percent, from 10 days before the announcement of the acquisition to 10 days after the successful bid. For 26 transactions, the combined company saw an average loss in total value of $83 million. Anju Seth, an associate business professor at the university and one of the study's authors, said that managers sometimes choose to avoid the risks that are involved with takeovers. Although investors prefer the equity growth associated with takeovers, managers tend to prefer a stable cash flow to the up- and downswings that result from takeovers. Even so, the study demonstrated that -- for the most part -- managers are able to correctly evaluate the wealth gains from mergers and to act in the interest of the shareholders. Cross-border acquisitions have increased greatly in the last decade with the growth of global markets. Foreign takeovers accounted for $73.5 billion in assets in 1996, up from $5.1 billion in 1982. That rate continues to climb, especially in the technology sectors, where many factors drive managers to find partners and acquisitions. As the rate of acquisitions skyrockets, do managers continue to create synergy as effectively? Yes, Seth said. "The Internet age is enabling managers to evaluate companies better." The study stopped short of quantifying merger benefits by industry because many large firms have holdings that span several industrial sectors. The findings raise the question of why foreign takeovers maximize more value than domestic takeovers. The answer, Seth said, will come from a new study.