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Richard Malekian
Acquisition Analysis Tutorial
Acquisition Analysis Tutorial
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$6.99 USD
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$6.99 USD
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This tutorial will explore both the quantitative and qualitative issues that a company will face when engaging in an acquisition. The quantitative issues will address what future flows an acquisition is expected to provide to an acquiring company, and therefore what range of purchase prices might be appropriate given those expected future flows. The qualitative issues will address the special circumstances under which a company might seek to create value for its shareholders via acquisition.
Learning Objectives
The purpose of this tutorial is to provide the framework as well as the tools to conduct a proper quantitative analysis of acquisition opportunities. Initially, the various reasons why a company may want to engage in an acquisition will be explored and critiqued, followed by a review of the historical pattern of acquisitions in the U.S. from the 1960’s through the current era. During this discussion, the importance of “synergy” in determining the ultimate value of an acquisition will be addressed.
The next section of the tutorial will address how acquisitions can be quantified and valued using a Free Cash Flow approach. In this section, we will address the quantification of total value received versus total value paid, and the determination of whether value is either created or destroyed for the acquiring company’s shareholders. Synergy will again be discussed as the primary driver of value in the analysis of acquisition candidates, and the need to properly quantify the synergies will be addressed.
The last section of the tutorial will address how acquisitions can be quantified and valued using an Economic Profit approach. We will show how both Economic Profit and Free Cash Flow yield the same answer with respect to acquisition valuation, even though the two approaches treat the actual investment in the acquisition differently. Ultimately, the reader will see that either approach can be relied on to quantify an acquisition in an economically valid and appropriate manner.
Learning Objectives
The purpose of this tutorial is to provide the framework as well as the tools to conduct a proper quantitative analysis of acquisition opportunities. Initially, the various reasons why a company may want to engage in an acquisition will be explored and critiqued, followed by a review of the historical pattern of acquisitions in the U.S. from the 1960’s through the current era. During this discussion, the importance of “synergy” in determining the ultimate value of an acquisition will be addressed.
The next section of the tutorial will address how acquisitions can be quantified and valued using a Free Cash Flow approach. In this section, we will address the quantification of total value received versus total value paid, and the determination of whether value is either created or destroyed for the acquiring company’s shareholders. Synergy will again be discussed as the primary driver of value in the analysis of acquisition candidates, and the need to properly quantify the synergies will be addressed.
The last section of the tutorial will address how acquisitions can be quantified and valued using an Economic Profit approach. We will show how both Economic Profit and Free Cash Flow yield the same answer with respect to acquisition valuation, even though the two approaches treat the actual investment in the acquisition differently. Ultimately, the reader will see that either approach can be relied on to quantify an acquisition in an economically valid and appropriate manner.
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