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Why do some acquiring companies end up paying high prices in Mergers and Acquisitions than the...

Why do some acquiring companies end up paying high prices in Mergers and Acquisitions than the values the target companies bring to them?

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Expert Solution

Merger and acquisitions is the process whereby one company combines with the another company in liue of some considerations.Most of the times this consideration is more than the value of the target company this is because of the following reasons:

(i) one of the most important reason is the synergy benefit that the acquiring company will be gaining from merger and aquisitions,this will increase the benefits greater than the total cost of acqusition.

(ii)Another reason is the goodwill or the brand image of the target company that motivates the acquiring company to pay more as it will lead to great advantage to there firm.

(iii)Another reason may be to keep the talented and the hardworking managerial staff of the target company so that they can be retiand in the acquiring company and will lead to growth of the company.

(iv) one more reason for paying more is that to finish the competition in the market that exist for the company and to become the leader in the business field.

jeff jeffy answered 2 years ago
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