Control Premium Study shows clear correlation between offer price in M&A transactions and 52-week share price high of a target company

May 30, 2013RSM Bird Cameron, one of the largest mid-tier accounting firms in Australia, has announced the results of its 2013 Control Premium Study. The study reveals that there is a clear correlation between the offer price in merger and acquisition (M&A) transactions and the 52-week share price high of the target company.

RSM Bird Cameron’s Control Premium Study analyses the implied control premiums observed in successful takeovers and schemes of arrangement. The control premium is the amount a buyer is willing to pay over the current market price of a publicly traded company.

Glyn Yates, director, RSM Bird Cameron, said, “It is not surprising that the study found a clear correlation between the offer price in M&A transactions and the prior 52-week share price high of the target company. The 52-week high could be perceived to provide both a familiar and recent benchmark of value to acquirers and acquirees.

“When considering change of control transactions, the control premium is a fundamental component of value. Ignoring this price component can significantly understate a company’s market value, especially in the current volatile economic environment.  Directors and valuers should consider this issue carefully when analysing and assessing transactions.” Read more ❯