This lesson examines the rationale, valuation, and financing of mergers and acquisitions.

8.1 The Market for Corporate Control

Mergers and acquisitions (M&A) involve the combination of two firms . The market for corporate control serves to allocate corporate assets to their most efficient use. Motives for M&A include economies of scale, synergies (cost savings and revenue enhancement), and strategic repositioning .

8.2 Valuation and Deal Structuring

Target companies are valued using comparable company analysis, precedent transactions, and discounted cash flow analysis . Deal structures include cash, stock, or a combination of both. Important elements include due diligence, valuation, and negotiation of target companies .

8.3 Integration and Corporate Governance

Post-merger integration is a critical phase for realising synergies . Corporate governance and executive compensation are central to aligning incentives in the context of M&A