Acquirers routinely pay large premiums over market value and justify them with two words: synergy and control. In this session, Prof Damodaran shows how to put a value on each, rather than treating them as a catch-all excuse for overpaying.
- Value of control: the difference between the business as it is run today and the business run optimally, and how likely that change really is
- Value of synergy: separating operating synergies (cost savings, higher growth) from financial synergies, and allowing for the time and cost it takes to realise them
- Complexity: why opaque structures and hard-to-read financial statements reduce what a business is worth
Highly relevant to business owners considering a sale, buyers preparing an offer, and anyone involved in M&A, fairness opinions or purchase price allocation.