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Valuation in mergers and acquisitions

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Valuation - Avoiding the Winner's Curse

Kenneth R. Ferris, Barbara S. Pécherot Petitt

mergers acquisitions valuationKenneth Ferris and Barbara Pécherot Petitt are both Professor at Thunderbird, The American Graduate School of International Management and also work as valuation, mergers and acquisitions consultants. Their book "Valuation, Avoiding the Winner's Curse" is about valuation especially in Mergers & Acquisitions situations. The book explains methods including Economic Value Added and Real Options and also contains a chapter on accounting dilemmas and one on financial reporting and tax considerations in M&A.

Five principal reasons for the destruction of merger and acquisition value are given:

1. Overestimation of target firm growth and/or market potential,

2. Overestimation of expected cost and/or revenue synergies,

3. Overbidding,

4. Failure to undertake a thorough due diligence,

5. Failure to successfully integrate an acquiree after the merger or acquisition.

This book on mergers and acquisitions valuation is recommended reading for both senior executives planning a merger or acquisition and for valuation analysts.

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