How much synergy do you need?

نویسنده

  • Dorian Swerdlow
چکیده

Earnings are an important contributor to value, but a deal’s harm to the balance sheet can more than offset the value of increased earnings. Of course you want to see earnings per share increase, but not if your share price ultimately drops. If your company has access to cheap currency (a low cost of borrowing or a high stock price), it is easy to do an accretive deal. However, your cheap currency doesn’t change the market value of the target, and the target may not be the best use of your resources. If you overpay for a target, your share price may suffer even if your earnings per share get a near-term bump. This is a result of reduced earnings growth prospects from committing resources to the wrong investment. (See sidebar, Why is earnings-per-share accretion not a proxy for value creation?)

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تاریخ انتشار 2014