Study Finds Key to M&A Value | ETF Trends

An article in Barron’s discusses the findings of a new study by Harvard Business School doctoral candidate Matthew Schaffer that explores the usefulness of independent valuation experts in acquisitions.

Based on his study of approximately 2000 deals occurring between 2006 and 2016, Shaffer argues that “directors and shareholders of acquirers would benefit from paying closer attention” to the findings of third-party valuation experts. Specifically, he found that variances between acquisition price and what analysts determine to be “fair” can be predictive:

“When an acquirer announces it is going to pay a relatively high price for a target compared with the nonpublic independent valuation range, the acquirer’s stock price goes down. By contrast, when an acquirer announces it is paying a low price for a target relative to the range established by its target’s bankers, the share price goes up.”

Shaffer also found that these differences predict whether acquirers will be forced to write down their goodwill over the five years following the deal.

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