Hi,
Is there a decision rule to determine if a strategic buyer should buy and merge with another company? Obviously there are factors such as differing cultures and integration difficulties that could determine, but is there a quantitative way? How is it done in practice? Could it be done by doing a combined DCF including a valuation of synergies and look at value created and compare it to IRR on other projects as well as cost of cap?
Read up on Accretion/Dilution Analysis
no you are incorrect. although accretion/dilution is important, value creation is also a key decision determinant and theoretically you could have a value destructive merger but eps accretion..
Chill... obviously there are various rules and this is in general a very subjective process. He asked for a decision rule
Bump. any thoughts of how companies determine whether or not to perform the acquisition other than being EPS accretive?
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