Overpriced mergers and acquisitions in the chemical industry

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Title: Overpriced mergers and acquisitions in the chemical industry
Author: Momin, Farid L.
Abstract: Mergers and acquisitions within the chemical industry is a common practice to increase market presence and customer base . Common justifications for M &A include synergy , business growth and competitive advantages , and management reasoning . Synergies are benefits a combined firm is able to receive through cost reductions , market expansion , and efficiencies in processes . As a result , firms are able to grow and position themselves competitively . To prevent an overpriced acquisition , numerous valuation techniques exist . The discount cash flow examines the value of a firm based on future cash flow . The market multiple compares target firms to similar firms in the industry . Lastly , the asset valuation determines the value of a firm based on the liquidation of the firm . To maximize the return on an acquisition , proper due diligence should be conducted based on the needs and goals of the purchaser , and the value added by the target firm . The premium paid for an acquisition should be based on the valued added through the synergies identified . Current business cycles and future outlook should also factor into the pricing of the acquisition . Having a thorough analysis of a target firm can help the acquirer to clearly understand what is being purchased and hence , determine an appropriate price for the acquisition .
URI: http : / /hdl .handle .net /2152 /ETD -UT -2009 -12 -554
Date: 2010-08-26

Citation

Overpriced mergers and acquisitions in the chemical industry. Master's thesis, The University of Texas at Austin. Available electronically from http : / /hdl .handle .net /2152 /ETD -UT -2009 -12 -554 .

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