Since 85, more than 325’000 mergers & acquisitions have been completely announced with a total benefit of 34’900 bil. CHF. Many of them, especially in the past 3 decades, have been good. However , the normal belief that every acquisitions produce value intended for acquirers and got companies as well is incorrect. Statistically and financially, the value of the acquirer’s business often falls off after the acquisition is completed (for all-cash deals, it is very likely to go up).

What really matters is the preclosing industry return. It is a key factor that the two acquirer as well as the target have to focus on, because they will have to agree with a purchase price for the deal. The acquiring company has to figure out how very much value it may put through synergetic effects, and the target’s managers have to second-guess the acquirer to find out how substantial a premium they can push.

As a result, the focus in board-rooms and the financial press tend to be on the price given money for the target. This is not wrong, but it surely neglects the other problems that need to be resolved prior to a deal can easily succeed. The other significant issues would be the tax repercussions and accounting treatment that may arise throughout a purchase, and that have to be factored into the whole returns designed for both acquirer and the acquired. The next issue may be the ability of a buyer to finance the deal at satisfactory levels.