Companies frequently use mergers and acquisitions as a way to grow by entering new markets or diversifying their product offerings. In the short-term these deals can help increase the company’s profitability and increase its growth. But in the long-term these deals must produce enough synergy value to justify the cost to shareholders. It is vital that boards are aware and evaluate the value of M&A.
M&A volume has been growing quickly over the last few years. However, the value of big deals has been decreasing, with no so-called mega-deals completed in the first quarter of 2017. M&A activity is at a standstill since the middle of 2016.
This article examines the four factors that should be considered when evaluating the value of an M&A transaction.
In the M&A business, it’s normal for an acquirer pay more than the target company shares are worth to gain access to new markets. In many cases, however, the acquisition fails to data room management system live up to its promises. If this happens the shareholders of the acquired company are left in the dark about “What were they thinking?” Examples of these flops include Apple’s purchase of iTunes HP’s purchase of enterprise search and data analytics firm Autonomy, and News Corp’s acquisition of social media site MySpace.
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