Firm T (target), which is badly managed, has a current market share price (Status Quo value) of

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Firm T (target), which is badly managed, has a current market share price (Status Quo value) of $4 per share.

Optimal Value of firm T on a stand-alone basis is $6 per share.

The merger of Firm A (acquirer) and Firm T (target) businesses yields an estimated synergy value of $4 per share.

1. What is maximum value of the target firm T to the acquiring Firm A? What are the potential M&A value can be created from this merger?

2. Suppose firm A acquired firm T at an acquisition price of $8 per share. What is the merger premium paid by firm A? Who get's the most of the merger benefits?

Related Book For answer-question

Fundamentals Of Corporate Finance

ISBN: 9780135811603

5th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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Posted Date: Jun 23, 2023 01:26 AM

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Firm T (target), which is badly managed, has a current market share price (Status Quo value) of

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1 The maximum value of the target firm T to the acquiring firm A is the sum of the optimal valu... View the full answer

Fundamentals Of Corporate Finance

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