RSM333H1 Lecture Notes - Lecture 7: Capital Expenditure, Market Power, Knowledge Transfer
Document Summary
The current equipment can be sold now for 1200 and would be worth 600 in year 5. The change in initial cost is 3800. The change in salvage value is 200. Synergies: whole is greater than sum of parts, allows for deal that satisfies both buyer and seller, value created by combination of two companies. Reduce duplicate functions: economies of scale, cost cutting, knowledge transfer. Capturing synergies: how value of synergy is divided between target and acquiring shareholders. Depends on premium paid by acquirer and form of payment. Impacts likelihood of deal being accepted: depends on relative bargaining power of buyer and seller, assume pre-merger market values are correct. Markets are efficient: ev = equity value + debt - case.
