Creating Value: how do companies get more than they paid for in M&A deals

Mergers and Acquisitions (M&A) are incredibly complex operations where two different legal entities become one. It is one of the most important corporate events on stakeholders’ careers, due to their high stakes and complexity, are immensely time-consuming, and is one of the subjects most affected by the theory-practice gap that bothers corporate managers and academia in modern days. Therefore, this work aims to serve as a practical guide to bridge knowledge in business and academia. It relied on heavy and extensive research on the conventional literature in modern finance and behavioural economics and past deals’ documentation. Additionally, real examples were used whenever possible to provide a more relatable feeling in the reader and facilitate conceptual understanding. The work is divided into three main ‘theoretical’ chapters and a case study: The first chapter approaches the rationale behind an M&A and shows several explanations as to why companies would engage in such activity; the second chapter dives into the intrinsically complicated mechanics of M&A deals and how some of the acquirer’s choices can influence the target’s perceptions of value regardless of the price paid; the third chapter presents the two main valuation theories in detail. Finally, a case study analysis of the acquisition of Whole Foods by Amazon is conducted. The choice for this particular operation comes from its somewhat revolutionary impact on the groceries market and its high expectations. While the hype was later proven excessive, the deal could still be regarded as Amazon’s successful first step towards a greater grocery integration.