Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
words,thereistruthtotheadagethatyoucanfoolsomeof the investors some of the time. Quick Growth Facedwiththeprospectsofanemicgrowt ...
Acquiring Firm Target Firm Debt-to-capital ratio 10% 10% Revenues ($ millions) $1,000 $500 Operating income (EBIT) ($ millions) ...
Acquiring FirmTarget Firm Cost of equity 7.45% 9.05% After-tax cost of debt 3.50% 3.50% Cost of capital 7.06% 8.50% After-tax re ...
EVIDENCE ON SYNERGY—VALUE CREATED AND ADDED Intheprecedingsection,weshowedthatsynergycanhave considerablevalueinmanyacquisitions ...
whattheexpectedsynergyvalueisandwhogetsthegains. Thesecondistotrackmergersaftertheyoccurandevaluate the success of firms in deli ...
19 This resulthastobe interpretedwith caution,however, sincetheincreaseinthevalueofthecombinedfirmaftera mergerisalsoconsistentw ...
createdvalueforthecombinedfirm, 30 percentwere value neutral, and 53 percent destroyed value. 21 MoellerandSchlingemann(2004)br ...
percent,suggestingthatfewfirmsenjoythepromised benefitsfromacquisitions.Inanotherstudy,Kaplan and Weisbach (1992)found that 44 p ...
determining how this incremental value should be shared betweentheacquiringfirmandtargetfirmstockholders.We willlook atthespecif ...
share of the benefits. This would be the case, for instance,inamergeroftwoconsumerproductfirms where the primary cost savings wi ...
growth firm with little cash (and great investment opportunities)cometogether,thesharingofbenefits willdependagreatdealonwhichof ...
somecases,acompetingbidderwillenteranddriveupthe price. With private businesses, especially smaller ones, openingupthebiddingpro ...
FIGURE15.3CumulativeExcessReturntoTargetCompany Stock Source:Dennis and McConnell (1986). Notethatlittlemorethanhalfthepremiumas ...
tender offers are slightly higher than the premiums in mergers.Figure 15.4, extracted from one study, 31 provides an illustratio ...
Netter, in theirexamination of tender offersfrom 1962 to 1985,noteadeclineinreturnstobiddingfirmstockholders from4.4percentinthe ...
QVC, which lost the bidding war, actually had higher synergies with Paramount than Viacom did. Consideringtheevidence,itiseasyto ...
Managerial hubris. Roll (1986) argued that managerialpridewasattherootoftheoverpayments in many acquisitions. 34 Acquiringfirms ...
Theevidenceonmergersaddingvalueismurkyatbestand negativeatworst.But somemergersclearlyaddvalueand somearesuccessfulatcreatingsyn ...
Acquisition programs that focus on buying small privatebusinessesforconsolidationshavehadmore successthanacquisitionprogramstha ...
COMMON ERRORS IN VALUING SYNERGY While firmsareoftenwillingto paybillionsof dollarsfor synergyinmergers,thereareseveralcommonerr ...
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