Post-acquisition share values - part 1

In this lesson

1. 0:00 Post-acquisition share prices explained
2. 0:36 Introduction to bootstrapping concept
3. 1:22 Understanding synergies and combined value
4. 6:25 Five-step calculation methodology
5. 7:15 Step one: valuing the target company
6. 7:47 Step two: valuing the acquiring company
7. 8:01 Step three: calculating combined company value
8. 8:30 Step four: working out combined share price
9. 8:50 Step five: assessing the offer

About this lesson

This video covers bootstrapping (how a target company's earnings get valued at the acquirer's price-earnings ratio) and synergies (the additional value created by combining businesses), then walks you through a five-step calculation to determine the combined company's share price. This technique is essential for evaluating share offers in acquisition scenarios across CIMA and ACCA papers, particularly when assessing whether target shareholders should accept an offer of shares in the combined business. The lesson uses a practical example comparing Apple's acquisition of a smaller technology company to show how bootstrapping works in practice. You'll see how the same earnings can have vastly different valuations depending on which company's price-earnings ratio is applied, and why acquirers might pay a premium based on the synergies they expect to create. By following the structured five-step methodology—valuing the target company, valuing the acquirer, calculating combined value with synergies, determining the new share price, and assessing the offer—you'll be able to tackle post-acquisition valuation questions with confidence and consistency.

Duration: 9m