. Customer service is our top priority!. Methodology Sample Acquiring Firm Performance Independent Variables Changes in Risk Taking Following Acquisition Empirical Techniques 7. Dissects and explains in understandable terms why and how they can actually diminish shareholder value. ¹¹ The merger and acquisition field is well established.
Yet the hypothesis fails to explain why the premiums paid over the past ten to fifteen years are as much as five times the premiums paid during the 1960s and early 1970s when acquisitions on average created value for shareholders. This is the price excluding shipping and handling fees a seller has provided at which the same item, or one that is nearly identical to it, is being offered for sale or has been offered for sale in the recent past. About this Item: Free Press, 1997. This situation is analogous to emerging technology investments where investors pay for breakthroughs that have not yet occurred, knowing that competitors are chasing the same breakthroughs. Most prior research on mergers and acquisitions has reflected the divisionalized nature of business schools. The risks are too great otherwise.
Sirower shows how to determine in advance when the price is far above the potential value of an acquisition. Finally, this book is dedicated to the memory of my parents, who lovingly preached the values of integrity, honesty, determination, and perseverance. In fact, a potential acquirer should probably worry if no one else is bidding on the company. And these disappointing results hold also for market share and growth. Acquisition premiums can exceed 100 percent of the market value of target firms. With acquisition activity running into the trillions of dollars, the acquisition alternative continues to be the favorite corporate growth strategy of this generation's executives.
And even then the intensity of the managerial challenge is imposing. Meanwhile, the more you delay running harder, the higher the incline is set. Stock market reactions to mergers and acquisitions are the aggregate forecasts of investors and analysts around the world of the expectations of the value of the investment. Discussion of ResultsAggregate Results on AcquisitionsTraditional Tests and Replications of Evidence on RelatednessTesting the Acquiring Firm Performance ModelTests for Changes in Risk Taking8. To date, Sirower's work is the most comprehensive and rigorous, yet practical, analysis of the drivers of acquisition performance. This is the acquisition game. A merger is just a stock purchase on a much larger scale and, therefore, has a much more noticeable effect on price.
He speaks frequently on creating value through mergers and acquisitions for major corporations and in a variety of public forums. After decades of research and billions of dollars paid in advisory fees, why do these major decisions continue to destroy value? About this Item: Free Press. If you issue claims or cash in an amount greater than the economic value of the assets you purchase, you have merely transferred value from the shareholders of your firm to the shareholders of the target -- right from the beginning. Choose expedited shipping if available for much faster delivery. This, however, does not a good theory make and he provides little in the way of explaining why mergers fail to improve the lot of stockholders. Paying a premium for synergy—that is, for the right to run harder—is like putting on a heavy pack.
Once they are caught in the trap, do they make matters worse by exhibiting gambling behavior? Why in fact do some acquisitions lose more money than others? Simply put, achieving synergy means competing better. There are many ways to lose the game, but if you want to better your chances of success, you must understand the components of the game and the underlying fundamentals. Obvious but untrue advice and folklore about acquisitions has led to bad business decisions. Acquirer Performance and Risk TakingCorporate Acquisitions as a Strategy for Value CreationAcquisition PremiumsStrategic Relatedness of AcquisitionsMethod of PaymentThe Performance Effects of Mergers versus Tender OffersRelative Size of the AcquisitionManagerial Risk Taking Following Acquisition6. At ThriftBooks, our motto is: Read More, Spend Less. Sirower does a remarkable job in showing how easy it is to lose the acquisition game by failing to define synergy in terms of real, measurable improvement in competitive advantage. After decades of research and billions of dollars paid in advisory fees, why do these major decisions continue to destroy value? They can predict the probability and the amount of shareholder losses or gains.
Unless they consider the odds of payoffs in acquisitions, executives are merely playing craps with shareholder resources worse -- because at least in craps, we know the odds. The Synergy Trap is based on his pathbreaking Columbia University doctoral thesis. Specifically, I ask four major questions: 1. Companies that do not understand this fundamental equation risk falling into the synergy trap. And in the process, acquirers may run the risk of taking their eyes off competitors or losing their ability to respond to changes in the competitive environment. A copy that has been read, but remains in excellent condition.
What is the acquirer paying for? The high premiums paid to acquire new companies compares favorably to paying these taxes and paying taxes is much worse for society. Yet despite all of this advice, many fail. Choose expedited shipping if available for much faster delivery. Sirower explains how companies often pay too much-- and predictably never realize the promises of increased performance and competitiveness-- in their quest to acquire other companies. Sirower shows that companies must meticulously plan -- and account for huge uncertainties -- before deciding to enter the acquisition game. Perhaps this is because the concept of synergy itself has been poorly defined.
Consequently they are certain that the managerial kiss will do wonders for the profitability of the target company. Regardless the good work done by Dr. Stripped to the essentials, an acquisition is a purchase of assets and technologies. Sirower shows that companies must meticulously plan-- and account for huge uncertainties-- before deciding to enter the acquisition game. While his own interpretation and policy conclusions are far off base, he has provided good evidence for the Austrian theory that antitrust policy is harmful to the competitive process and standard of living in society. They often fail to consider that it is incorrect to judge the soundness of an acquisition decision on the basis of what it would cost the company to develop that particular business from scratch—an idea that may have been a value-destroying decision on its own. Sirower's thought-provoking and complex book is actually a critically acclaimed academic study that challenges the reasoning behind corporate acquisitions.