An analysis of value destruction in AT&T's acquisition of NCR

An analysis of value destruction in AT&T's acquisition of NCR AT&T's $7.5 billion acquisition of NCR decreased the wealth of AT&T shareholders by between $3.9 billion and $6.5 billion and resulted in negative synergies of $1.3 to $3.0 billion. We find that AT&T paid a documented $50 million and possibly as much as $500 million to satisfy pooling accounting, thus boosting EPS by roughly 17% but leaving cash flows unchanged. We conclude that AT&T's decision to acquire NCR in what the market perceived as a value-destroying transaction was related at least in part to the 1984 consent decree with the Department of Justice that led to the break-up of AT&T. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

An analysis of value destruction in AT&T's acquisition of NCR

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Publisher
Elsevier
Copyright
Copyright © 1995 Elsevier Ltd
ISSN
0304-405x
DOI
10.1016/0304-405X(95)00831-X
Publisher site
See Article on Publisher Site

Abstract

AT&T's $7.5 billion acquisition of NCR decreased the wealth of AT&T shareholders by between $3.9 billion and $6.5 billion and resulted in negative synergies of $1.3 to $3.0 billion. We find that AT&T paid a documented $50 million and possibly as much as $500 million to satisfy pooling accounting, thus boosting EPS by roughly 17% but leaving cash flows unchanged. We conclude that AT&T's decision to acquire NCR in what the market perceived as a value-destroying transaction was related at least in part to the 1984 consent decree with the Department of Justice that led to the break-up of AT&T.

Journal

Journal of Financial EconomicsElsevier

Published: Oct 1, 1995

References

  • Does the stock market overreact?
    De Bondt, Werner F.M.; Thaler, Richard
  • Do managerial objectives drive bad acquisitions?
    Morck, Randall; Shleifer, Andrei; Vishny, Robert W.

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