Valuation, Measuring and Managing the Value of Companies - by McK.&Co, T. Koller, M. Goedhart, D. Wessels
Re-rating Illusion
It’s a widely spread misconception when investors believe that purchasing a company with a high P/E ratio from a company with a low P/E ratio automatically corrects both ratios to the higher one and not the average…
Such statements can simply be misleading… What shouldn’t be targeted as an idea and should be critically examined…
Acquisition or merger only creates the value when there’s either a reduction in total costs or an increase in total revenues, meaning the creation of better total financial outcomes or a decrease in WACC…
Source*:
#VALUATION – Measuring and Managing the Value of Companies, 7th Edition;
McKinsey & Company, Tim Koller, Marc Goedhart, David Wessels