Dear John Sir,
sir is not the way to find the synergy from acquisition, this way:
MV of combined co's equity less MV of acquirer's equity less MV of target's equity?
And if this is the case, then why in PURSUIT CO. is MV of whole firm is used (including debt) in combined and individual firm cases, to arrive at synergy?
Regards,
Ask the Tutor ACCA AFM
PURSUIT CO (JUN 11 ADAPTED)-Kaplan Exam kit
5y ago#1Depending on the information given, and any specific approach required by the question, then either approach is fine because any benefit always belongs to the equity and not to the debt.
"MV of combined co’s equity less MV of acquirer’s equity less MV of target’s equity?"
I am getting a negative answer for synergy, when i tried following the aforementioned method.
5y ago#3But why did you try and look just at equity anyway given that the question specifically asked you to use the free cash flow to the firm method, and not free cash flow to equity???
They are using debt to help finance the acquisition which will affect the equity.
Sign into reply to this topic.