Mergers and Acquisitions

Dirk Schoenmaker and Willem Schramade
Additional contact information
Willem Schramade: Nyenrode Business University

Chapter 18 in Corporate Finance for Long-Term Value, 2023, pp 541-577 from Springer

Abstract: Abstract Mergers and acquisitions (M&A) are very large investments in which a company absorbs another company, which can dramatically change the profile of a company’s assets. This chapter discuss various types of M&A and the motives behind them, along with calculation examples. Just as in any other investment decision, the financial sanity of M&A activity can be assessed with the NPV method. However, the numbers tend to be much bigger than in ordinary capex decisions, hence the stakes are bigger as well. This makes behavioural issues even more problematic, as they can result in very large overvaluation, overinvestment, and value destruction. Likewise, if not properly understood and considered, environmental (E) and social (S) issues can have similar effects as the abovementioned behavioural issues and reduce the company’s financial value. While the effects of E and S issues on M&A valuation are increasingly understood, scarce academic attention is given to the valuation of E and S in their own right in M&A deals. An M&A deal can be massively value destructive on E or S, which may justify blocking the deal.

Keywords: Acquirer; Acquired company; Acquisition; Behavioural issues; Bid; Bidder; Buyer; Conglomerate M&A; Due diligence; Economies of scale; Economies of scope; Horizontal M&A; Industry consolidation; Integrated takeover test; Merger; Mergers and acquisitions (M&A); NPV method; Overinvestment; Overvaluation; Synergies; Takeover; Takeover premium; Target; Target company; Value creation; Value destruction; Value extraction; Value of performance improvements; Vertical M&A (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-031-35009-2_18

Ordering information: This item can be ordered from
http://www.springer.com/9783031350092

DOI: 10.1007/978-3-031-35009-2_18

Access Statistics for this chapter

More chapters in Springer Texts in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().