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In at the moment’s market, each the acquirer and the target company know that the acquisition worth will probably be larger than the intrinsic value—in different phrases, that the buyer will probably pay a premium.1 That premium allocates among the future benefits of the mix to the target shareholders. Absent a premium, most target shareholders would refuse to sell. The acquirer’s managers need to determine simply how large a worth hole their company can bridge by way of synergies. The goal, in the meantime, will second-guess the acquirer, trying to calculate how excessive the price may be pushed. If there’s a couple of potential acquirer and the bidding will get competitive, that places even more upward pressure on the value.

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