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Aswath Damodaran

Valuing Acquisitions

When analyzing investment decisions, we did not consider in any detail the largest investment decisions that most firms make, i.e., their acquisitions of other firms. Boeing’s largest investment of the last decade was not a new commercial aircraft but its acquisition of McDonnell Douglas in 1996. At the time of the acquisition, Boeing's managers were optimistic about the merger, claiming that it would create substantial value for the stockholders of both firms. What are the principles that govern acquisitions? Should they be judged differently from other investments?

By Prof. Aswath Damodaran


Acquisitions and takeovers

Background on Acquisitions

Empirical Evidence on the Value Effects Of Takeovers

Create Operating or Financial Synergy

Take over poorly managed firms and change management

Choosing a Target firm and valuing control/synergy

In Practice 26.1: A Status Quo Valuation of Digital

In Practice 26.3: Value of Control


Debt Capacity

Structuring the Acquisition

Accounting Considerations

The Post-Deal Performance of Merged Companies

Takeover Restrictions

Analyzing Management and Leveraged Buyouts

In Practice 26.7: Valuing A Leveraged Buyout: Congoleum Inc.