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Subject 9. Benefits from Mergers PDF Download
The empirical evidence suggests that merger transactions create value for target company shareholders. Some believe that the high premiums paid to target shareholders are partly the result of the winner's curse, in which the competitive bidding process is won by the firm who overestimate the target's value. When there is a competition among bidders, it will increase the gains for the target.

The Hubris Hypothesis: the acquiring firm's management overvalues their ability to create value once they take control of the target firm's assets.

Acquirers, in contrast, tend to accrue value in the years following a merger. This finding suggests that synergies are often overestimated or difficult to achieve.

Learning Outcome Statements

j. describe characteristics of M&A transactions that create value;

CFA® 2023 Level I Curriculum, Volume 3, Module 18

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