See more contributions to PitchBook M-A 101 Series How to achieve sound valuations in mergers and acquisitions Was kartells mittels for Fusions und `bernahmeen ist bar. These transactions are generally referred to as acquisitions, not mergers, since the shareholders of the target company are removed from the image and the objective is placed under the (indirect) control of the bidder`s shareholders. Increased acquisitions in the global business environment require companies to carefully evaluate the major shareholders of the acquisition prior to implementation. It is essential for the purchaser to understand this relationship and apply it to his or her advantage. Staff retention is only possible if resources are exchanged and managed without undermining their independence.  A merger allows small business shareholders to own a smaller piece of a larger cake, thereby increasing their total wealth. The stock offerings therefore send two strong signals to the market: that the acquirer`s shares are overvalued and that his management does not have confidence in the acquisition. In principle, a company confident in the successful integration of an acquisition and who believes that its own shares are undervalued should therefore always face a cash offer. A cash offer solves the valuation problem for buyers who think they are undervalued as well as for sellers who are unsure of the true value of the recipient business. But it`s not always that simple. It is not uncommon, for example, for a company to not have sufficient liquidity – or debt capacity – to make a cash offer. In this case, the decision is much less clear and the board must assess whether the additional costs associated with issuing dumped shares still justify the acquisition.
In principle, however, accounting should not differentiate between the value of an acquisition. While it can have a dramatic impact on the reported profits of the recipient company, it does not affect operating cash flow. Goodwill amortization is a non-liquidating element and should not affect value. Executives are well aware of this, but many say investors are briefly addicted to short-term returns and cannot understand the cosmetic differences between the two accounting methods. A merger allows the objective (actually the seller) to recognize the appreciation potential of the merged entity rather than limited to the proceeds of the sale.