The best practices outlined here emerged from in-depth interviews with senior executives in 40 companies in a range of industries and nine countries. The successful companies in our survey are skilled at using accurate pricing to create shareholder value. In some cases, value is actually destroyed and performance declines after a deal is completed.
Many deals fail quite simply because the acquirer overpays.
We put these questions to 75 senior executives, and found they take a systematic, disciplined approach to pricing. An objective assessment of the internal resources needed to absorb and manage target companies will increase the chances of success. Two additional factors, financial engineering and tax benefits, offer short-term advantages. Cost savings, such as lower overhead and staff reductions, are the most common source of synergy and easiest to estimate. Revenue enhancements encompass the higher sales, earnings, and cash flow that combined resources are expected to generate.