In your judgment, are acquirers more likely to under or overestimate anticipated cost savings? Why?

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Acquirers will generally be over estimating the cost savings because when they will be trying to enter into acquisition with the target company, they will always be trying to overestimate the benefits associated with the acquisition of the target company and there will be a overvaluation of the cost benefit which will be ascertained with various intermediaries in relation to acquisition of a target company.

Anticipated Synergy will be often overestimated as tangible Synergy due to cost saving from eliminating duplicate overhead facilities is most easily measured and it is likely to represent the greatest source of value to be realised from combining two firms and cost savings from acquisition of of target company will be overstated because the acquirer company wants to buy this target company badly enough and management will always be able to justify a higher buying price for its own company so acquirer will always try to overestimate the cost savings associated with an acquisition

jeff jeffy answered 1 year ago

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