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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (2634)	8/4/2000 11:56:11 AM
From: Freedom Fighter	Read Replies (3) \| Respond to of 4691

I have a theoretical question for you guys. When you look at takeover prices in most industries, the price paid is almost always a premium to the prevailing stock price prior to the bid. In most cases, the buyer is willing to pay the premium for a variety of reasons. 1.Cost savings resulting from eliminating overlap 2.Synergies 3.Purchasing power 4.Shelf space 5.Distribution 6.Lower borrowing costs for the acquired company 7.Interest is tax deductible 8.Control 9.Other That being the case, isn't it misleading to equate takeover prices with stock prices when trying to value a company that's trading on its own? In most cases you won't get that price unless you are acquired. Recent prices in the food industry are a perfect example. Wayne