Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
futureyears.Note,though,thatanotheraccountingitemthat accruesfromacquisitions,whichisgoodwill,doesnotyield the same tax benefits ...
thevalueofthetaxsavingssynergy,ifweassumethatthe target firm could never have used the net operating loss. Things become progres ...
One of the earliestleveraged buyouts (LBOs)occurred in 1979 andinvolvedCongoleumInc.,adiversifiedfirminship building,flooring,an ...
Debt Capacity Ifthecashflowsoftheacquiringand targetfirms areless thanperfectlycorrelated,thecashflowsofthecombinedfirm willbe l ...
perfectlycorrelated.Thedebtcapacitybenefitsincreaseasthe earnings of the two firms become less correlated and as investors becom ...
to1.1866andnochangeinthecostofdebt),thevalueofthe combined firm after the takeover can be estimated as shown: Asaconsequenceofth ...
earnings per share increase after the acquisition, whereas acquiring a company with a P/E ratio of 40 will lower earnings per sh ...
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 ...
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