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by nreece
6846 days ago
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As the letter states: Yahoo paying FB $100 per user, and not every FB user buying anything worth $100. So the Yahoo offer is much more lucrative. Is it a justifiable to work on this idealogy for an acquisition? Say, for xyz.com, if each user brings in $10 on average (through advertising or sales), should the acquisition value (per user value) be more than that amount? I'm not quite aware of this, so thought I'd ask. |
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The gospel is that the value of a company is the total value of expected future cashflows. This generally applies to publicly traded companies.
AFAIK acquirers typically pay more than the market value since the acquirer usually perceives more value for it. Eg. Yahoo and MSFT may be able to make more money with facebook than facebook can by itself. Their bidding can drive the price up.
There are also strategic reasons. Eg: Yahoo might die if MSFT acquires facebook instead. This can also drive the price up.