The Value of Mergers and Acquisitions

Companies frequently use mergers and acquisitions to grow by entering new markets or diversifying their product offerings. In the short-term the deals can improve the profitability of a business and its growth. But over the long haul they must provide enough synergy value to justify the purchase price to shareholders. This is why it’s vital for boards to know and assess the benefits of M&A.

M&A volume has been rising click here to find out more quickly over the last few years. The value of large transactions has declined, and no so-called mega deals were concluded during the first quarter. M&A activity has been stagnant since the middle 2016.

This article examines four factors to take into account when evaluating the value of an M&A deal.

In the M&A world, it is common for an 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 in the market. But in many cases, the acquisition fails to meet its promise of value. When this occurs the shareholders of the acquired company are left contemplating “What were they thinking?” Examples of these flops include Apple’s purchase of iTunes HP’s acquisition the data analytics and enterprise search firm Autonomy, and News Corp’s acquisition of MySpace, a social networking site. MySpace.