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P/E ratio changes vs P/E ratio remains constant after the acquisition

HHameez4y ago
https://opentuition.com/topic/louieed/ 1) So if the P/E was to change post acquisition, then we would use the combined company valuation technique? "1. You would apply the new PE to the new earnings." I found this answer from a previous post. Sir, I have a doubt in regards to calculation of the P/E ratio. In most of the questions related to Mergers and Acquisition, the examiner specifically says that the "PE ratio remains constant after the acquisition". So then we use the P/E ratio of Predator Company to calculate the total value of the combined company. Sir lets say if the P/E ratio changes after the acquisition, then to calculate the value of the combined entity we apply NEW P/E to the new earnings right? But how do we calculate this NEW P/E ratio. Is it calculated as, NEW P/E = (MPS of Predator Co + MPS of Target Co)/ New EPS based on new earnings or Is there are any other methods to calculate this NEW P/E ratio? Thanking you in advance for your kind explanation!
John MoffatJohn MoffatTutor4y ago#1
If the PE ratio does change, then the question will tell you how it changes :-)
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