Companies typically use mergers and acquisitions to grow by entering www.dataroomcloud.org/real-estate-data-room-specifics/ new markets or diversifying their product offerings. In the short-term, these deals can increase the profitability of a business and its growth. In the long term these deals should produce enough synergy to justify the cost to shareholders. It is essential that boards comprehend and evaluate the value of M&A.
In the past few years, M&A volumes have been increasing quickly. The value of big transactions has fallen and no mega deals were signed in the first quarter of this year. In fact, M&A activity has stalled since the middle of 2016.
This article outlines four elements to consider when assessing worth of an M&A deal.
In the M&A world, it’s typical for the acquirer to pay more than what the shares of the target company are worth in exchange for a chance to enter a new market or to improve its position on the market. In many instances, however, the acquisition fails to live up to its promises. If this happens, the acquired company’s shareholders may wonder “What were they thinking?” Examples include Apple’s purchase of iTunes, HP’s acquisition of enterprise data analytics and search firm Autonomy and News Corp’s acquisition of MySpace.
