payingtherightpricefora targetfirm.InFigure15.1, we
breakthepricepaidonanacquisitionintoamarketpriceand
apremiumoverthatprice.Noticethedifferencebetweenthis
figure,whichisbasedonthemarketpriceofthetargetfirm
beforeandaftertheacquisition,andTable15.1,whereweare
lookingatthevalueofthetargetfirmwithandwithoutthe
premiumsforcontrolandsynergy.Afair-valueacquisition,
whichwouldleavetheacquiringfirmneitherbetternorworse
off,wouldrequirethatthetotalprice(inFigure15.1)beequal
totheconsolidatedvalue(inTable15.1)withthesynergyand
control benefits built in. Note also the irrelevance of the
accountant’s estimate ofgoodwill (which is the difference
between market and book value) to any of this discussion.
FIGURE 15.1Breaking Down the Acquisition Price
Theacquisitionpricewilldeterminewhetheranacquisitionis
value increasing or value destroying to the acquiring
company’sstockholders.Thesynergyinamergermaywell