The Value of Mergers and Acquisitions

Mergers and acquisitions are often employed by companies to grow their business, whether through entering new markets or expanding their product offering. These deals can increase the company’s profitability and growth in the short run. In the long term the deals must bring about enough synergy that it is worth the price of acquisition for shareholders. It is crucial that boards comprehend and evaluate M&A’s value.

M&A volume has been increasing rapidly for most of the past few years. But the value of large deals has been declining, with no so-called mega-deals being completed in the first quarter of 2017. In fact, M&A activity has stalled since the middle of 2016.

This article discusses the four aspects that need to be considered when assessing the value an M&A transaction.

In the M&A business, it’s normal that acquirers pay more than the shares of the target company to gain access to an entirely new market. However, in many cases, the deal doesn’t fulfill its promise. When this occurs the shareholders of the acquired company are left in the dark about “What were they thinking?” Examples of these flops include Apple’s purchase of iTunes HP’s purchase of data analytics and enterprise search firm see here now Autonomy, and News Corp’s acquisition of MySpace, a social networking site. MySpace.