Post-acquisition share values - part 2

In this lesson

1. 0:00 Acquisition scenario and offer structure
2. 1:02 Valuing target and predator companies
3. 2:36 Calculating combined company value
4. 3:42 Working out post-acquisition share price
5. 4:00 Assessing offer acceptability for shareholders
6. 5:45 Bootstrapping and synergies summary

About this lesson

This lesson walks you through valuing both the target and acquiring companies, incorporating post-tax synergies, and determining the combined share price to assess whether a merger offer is acceptable. This is essential for Strategic Business Leader (SBL) and Advanced Financial Management (AFM) papers, where M&A analysis and shareholder value creation are key exam topics. The video uses a practical worked example to demonstrate the five-step process: valuing the target company using its price-earnings ratio, valuing the predator company the same way, combining both values and adding synergies (valued using the acquirer's P/E ratio—a technique called bootstrapping), calculating the new combined share price, and finally assessing whether shareholders would accept the offer. You'll see how synergies significantly impact post-acquisition value and why shareholder acceptance depends on realistic assumptions about whether those synergies will actually materialise. By working through this calculation, you'll build confidence in handling M&A valuations and understand the mechanics behind acquisition offers. The lesson emphasises that practice is key to mastering this type of problem, so you're encouraged to pause and work through each step yourself before checking your answers.

Duration: 6m