mergerval

mergerval - Valuation of Merger Target Corporate Financial...

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Unformatted text preview: Valuation of Merger Target Corporate Financial Decisions Timothy A. Thompson Basics Valuation of merger target is from the perspective of acquiring companys shareholders Net present value of acquisition is the value of the target to acquirer minus the effective cost Value of target to acquirer Value of the target to the acquirer is made up of: Stand alone value of the target plus Value of improvements at target made by acquirer management plus Value of pure synergies between target and acquirer Valuations must make a capital structure assumption The valuations (stand alone, improvements, and synergies) must make a capital structure assumption WACC model or APV model Be careful! The capital structure assumption should not be reflective of the financing used to buy the target per se, but should reflect the degree to which owning the target incrementally affects your debt capacity What?!What?...
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This note was uploaded on 03/08/2012 for the course FINA 6274 taught by Professor Williamhandorf during the Fall '11 term at GWU.

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mergerval - Valuation of Merger Target Corporate Financial...

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