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Hi Sir,
In an acquisition – when we are evaluating the gain to the victim in a share for share offer, should we use the value of the predator’s share price pre-acquisition or calculate the value of a share in the combined company and use this.
Thanks,
It depends from whose point of view the question is asking you to consider.
As far as the acquiring company is concerned, they will have the information needed to estimate the new value of the shares and will use this to determine the most they can afford to offer.
As far as shareholders in the target company are concerned, then will not have the information and so will make their decision as to whether to accept the offer based on the existing share value of the acquiring company.
If it is not clear to you which from the question, then state your assumptions and you will still get credit.
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