Companies often make mergers and acquisitions in order to grow by expanding their market or diversifying their product offerings. In the short term, these deals can increase the profitability of a business and its growth. But over click here to find out more the long haul the deal must create enough synergy value to justify the cost to shareholders. It is crucial that boards comprehend and evaluate M&A’s value.
M&A volume has been rising quickly for the last few years. The value of major transactions has decreased and no mega deals were executed in Q1. In fact, M&A activity has stalled since the beginning of 2016.
This article outlines four elements to consider when assessing value of an M&A deal.
In the M&A world, it is typical for the acquirer to pay more than what the shares of the target company’s are worth in exchange for the chance to enter a different market or improve its competitive position. However, often the deal doesn’t deliver on its promised value. When this happens, the newly acquired company’s shareholders may wonder “What were they thinking?” Examples include Apple’s purchase of iTunes HP’s acquisition enterprise data analytics and search firm Autonomy and News Corp’s purchase MySpace.