The Real Secret About Why Corporate Mergers Fail

AN AUDIO PRESENTATION

 

By Vitaliy Katsenelson CFA

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Corporate acquisitions often fail for one simple reason: the buyer pays too much. An old Wall Street adage comes to mind: Price is what you pay, value is what you get.

It all starts with a control premium

When we purchase shares of a stock, we pay a price that is within pennies of the last trade. When a company is acquired, the purchase price is negotiated during long dinners at fine restaurants and comes with a control premium that is higher than the latest stock quotation.

How much above?

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