Thursday, January 25, 2007

Big Deal(s): What's Driving the M&A Frenzy? - Knowledge@Wharton

Knowledge at Wahrton does its usual great job this month. The highlight? A look at the takeover market. GREAT stuff:

Big Deal(s): What's Driving the M&A Frenzy? - Knowledge@Wharton: "2006 set a record for mergers and acquisitions worldwide. Deals totaled $3.79 trillion, 38% higher than in 2005, and 55 of the transactions were valued at more than $10 billion each, according to data from Thomson Financial. "

One more look-in:

"mergers have asymmetric effects on different stakeholders. They don't have uniform effects across stakeholders.

There is always a degree of controversy surrounding M&A. So, one way of answering the question is to say that mergers are, generally speaking, good for sellers. Sellers typically get about 15%-25% premium on the pre-existing value of the firm, so they tend to do well. The evidence on buyers is more mixed.

The New York Times article says 3 in 10, but a lot of research says that it's probably 4 out of 10, buyers tending to make money and perhaps even 5 out of 10. And so buyers tend to essentially pay the fair market value for their candidate. What that means is because acquisition is usually initiated by the buyer, the buyer needs to insure that they have unique synergies. Just having synergy is not enough."

Definite required reading! Simply great. Thanks Wharton!!

No comments: