Sir one quick question.
How do we calculate the maximum premium payable for a target Company?
Ex: Lets say ABC acquired XYZ
Is the maximum premium payable calculated as,
[total value of the combined company - Current value of ABC]
or
[total value of the combined company - (Current value of ABC+Current value of XYZ)]
Pls Advise!
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Mergers and Acquisitions
4y ago#1It is the second :-)
That gives the total gain which is then shared between the shareholders of the two companies. It is the maximum premium given to the shareholders of XYZ which would mean that none of the gain was going to shareholders of ABC.
It should be the total equity value both the companies right not the total MV(which is equity+ debt)?
Thank you in advance for your explanation! Have a good day!
Then, how do we calculate the minimum premium payable to the Target Company?
4y ago#4Naveez - right, and you are welcome :-)
Hameez: The minimum is the amount that the target company demand. There is no rule for that - it depends on what the question says.
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