When corporations
announce mergers or acquisitions they love to give the reasons why
there is the premium invariably paid by the acquirer to shareholders
of the company being acquired.
After all, there has to
be an incentive to sell the business. And sometimes, that premium of
the targeted company’s book or operating value can be quite high,
well above current market pricing.
One of the main reasons
often given for this premium is the alleged value of synergy. That
is, the innate benefits to be derived from having the merger.
However, studies show that synergy frequently is not as beneficial as
it’s made out to be. Problems always arise where unexpected, from
merging staffs and personalities. And they may not be easily
minimized.
It’s
difficult to determine who really gets the benefit. They’re usually
done too fast, and far too often for CEO ego satisfaction.
(See the Earl J Weinreb NewsHole® comments and @BusinessNewshole
tweets.)
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