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Mergers and Acquisitions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Mergers and Acquisitions

  • This topic has 4 replies, 3 voices, and was last updated 1 year ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • July 25, 2021 at 5:50 pm #629404
    naveez
    Member
    • Topics: 15
    • Replies: 13
    • ☆

    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!

    July 26, 2021 at 7:59 am #629439
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    It 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.

    July 26, 2021 at 8:13 am #629447
    naveez
    Member
    • Topics: 15
    • Replies: 13
    • ☆

    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!

    July 26, 2021 at 8:39 am #629455
    Hameez2003
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Then, how do we calculate the minimum premium payable to the Target Company?

    July 26, 2021 at 12:33 pm #629471
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    Naveez – 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.

  • Author
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