Hello everyone,
I'm new to posting here, though I've been following the discussions for a couple of years. I've recently moved to the Corp dev team at a mid-cap tech company (AUD 2bn - AUD 10bn) after spending a few years in IB. The company frequently engages in small cross-border deals.
In determining the appropriate WACC for valuing potential targets, the company's approach involves using the buyer's WACC and then adding a size premium, typically around 1% to 2%. The rationale is that, since the target will be integrated into the holding company after the acquisition, we use the buyer WACC as that will be the final capital structure.
However, I was under the impression that using the buyer's WACC might lead to overvaluation of the target company. Anyone have more insight into this?
Thank you!
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