Is it true that when a company acquires another company then most of its important fundamentals and valuation multiples are at a premium/higher (less favorable) than most of its peers? Also, does the change in the company's fundamentals occur once it is announced that the acquisition is complete or is the change reflected in the next 10-q?
Finally, what sort of valuation multiples or important fundamentals of the acquiring company don't change because of the completion of the acquisition of a company?
Thanks
On average, transaction multiples are SUPPOSED to be higher than trading multiples, because there's the additional value of potential synergies that can bump the transaction price upwards. In practice, this difference may not always be apparent.
As for fundamentals changing when a company gets acquired... what? Why on earth would a company's fundamentals change just because it's the target of an acquisition? I'm not gonna suddenly start being more profitable or generating more sales just because I'm selling my business off.
Angus, the the question was posed as to the effect on the ACQUIRING company's fundamentals.
Well, fuck me, I'm retarded.
Change in the acquirer's fundamentals should occur as of the time of legal completion (which is for various reasons often different from the time of announcement of completion). Any such change should have more or less been priced in by then, though, barring uncertainty about completion.
Usually, any sizeable acquisition is going to result in a slight shift in valuation multiples of the acquirer. Some key fundamentals may not shift, though; for example, book value isn't gonna change, cos the acquirer's just swapping shit around on its balance sheet.
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