FINC3013 Lecture Notes - Lecture 5: Unobservable, Real Options Valuation, Opportunity Cost
31 Jul 2018
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Document Summary
Acquisition search, deal origination, due diligence and valuing. Information is key: what the market knows clearly is fully priced, not all information is created equal: clear v ambiguous & private v public information. If markets are semi-strong efficient, which is generally the case, all publicly available information is already reflected in prices: goal of search process: obtain private information! Information arrives randomly: valuation is very time-consuming so screening criteria are crucial: e. g. industry (position), resources and strategic capabilities, size of the business, profitability, organisational fit. The search or origination team needs to be organised in ways consistent with the external environment: persistence and repeated effort pay, searches require pro-activity, passivity is costly, activity pays! Finc3013 mergers and acquisitions: process, timing, best due diligence effort begins before buyer approaches target, once contact is established: Inquisitive, knowledge-focused: not merely checklists; want to generate knowledge: system-focused: linked to valuation, negotiation and closing.
