Conclusion: Closing the Deal, But at What Price?

Abstract

If there is one overriding “take-away” from this book, it is this: If the acquiring company pays too much for the target, it will destroy value, even if all of the projected synergies materialize. This seems both simple and obvious, but the reality is that most companies overpay. In fact, one could make an argument that, directly or indirectly, overpayment is the cause of the high M&A failure rate. It is the direct cause when a buyer overvalues the target’s assets or overestimates anticipated synergies—as was the case when HP purchased Autonomy (see Chap. 1). It is an indirect cause when other factors (e.g., the culture clash that ensued after the Daimler-Benz/Chrysler merger) cause millions or billions of dollars in predicted synergies to later evaporate (see Chap. 3).