Mergers and Acquisitions
Value acquisition synergies
Can a good strategic fit be a bad purchase?
Practise value acquisition synergies with a worked example and a short check.
Synergy creates value only if the incremental benefit exceeds the premium and integration costs.
Acquirer value gain ≈ PV of net synergies − premium over standalone value
Start with the value of savings or extra profits, subtract integration costs, then subtract what the buyer paid above standalone value. $20m − $8m − $15m = −$3m.
$20m of gross synergy PV less $8m of integration costs and a $15m premium implies −$3m for the acquirer.
Start with the value of savings or extra profits, subtract integration costs, then subtract what the buyer paid above standalone value. $20m − $8m − $15m = −$3m.
What is the maximum premium in the example before gains turn negative?