We started the session by looking at how allow us to value financial flexibility and equity in distressed companies, and then moved on to acquisitions. Acquisitions are exciting and fun to be part of but they are not great value creators and in today's sessions, I tried to look at some of the reasons. While the mechanical reasons, using the wrong discount rate or valuing synergy & control right, are relatively easy to fix, the underlying problems of hubris, ego and over confidence are much more difficult to navigate. There are ways to succeed, though, and that is to go where the odds are best: small targets, preferably privately held or subsidiaries of public companies, with cost cutting as your primary synergy benefit. If you get a chance, take a look at a big M&A deal and see if you can break it down into its components. I briefly mentioned the InBev/SABMiller merger in class but if you want something more extensive, I am going to offer you the blog post that I did on it when it happened:
aswathdamodaran.blogspot.com/2015/10/winning-at-losers-game-control-synergy.html
I go through the process of valuing control and synergy in a merger, and even if you don’t agree with my assumptions, the framework can still be useful.
Slides: pages.stern.nyu.edu/~adamodar/podcasts/valUGspr23/session26slides.pdf
Post class test: pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session26Atest.pdf
Post class test: pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session26Asoln.pdf
- Session 26: Equity as an Option and Acquirers' Anonymous ( Download)
- Session 26 (Val Undergrad): Distressed Equity as an Option and Acquirers' Anonymous ( Download)
- Session 26: Acquirers' Anonymous - Seven Steps to Sobriety ( Download)
- Session 26: Acquirers' Anonymous: Seven Steps to Sobriety ( Download)
- Session 24: Equity as an Option and Acquirers' Anonymous ( Download)
- Session 26: T'is the End! ( Download)
- Session 26: Closing the sale! ( Download)
- Session 24: Acquirers' Anonymous: Seven Steps to Sobriety ( Download)
- Session 24: Acquirers' Anonymous - Seven Steps to Sobriety ( Download)
- Session 25: Distressed Equity & Acquisition Analysis ( Download)
- Session 25: Undeveloped Reserves and Options to Expand and Delay ( Download)
- Session 23: Valuing flexibility and distressed equity as options ( Download)
- Session 23: Undeveloped reserves, the option to expand and the option to abandon ( Download)
- Corporate Finance by Aswath Damodaran session26 ( Download)
- Session 25: More on Real Options ( Download)
