Special Interest Purchaser

Posted in Finance, Accounting and Economics Terms, Total Reads: 1462
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Definition: Special Interest Purchaser

Each acquirer pays a unique price to the target acquisition. If a certain buyer expects to create an additional value as compared to other buyers, he may pay a premium for the expected interest and is classified as Special Interest Buyer. The expected interest can be real or notional. The incremental values that are normally created upon acquisition are:

Value of control (Value created by change of management)

Value of synergy (Value created by the reduced risk as a result of combination)

Formulae: Total Value of Acquisition=Value at Status Quo+Value of Control+Value of Synergy

Example: If the stand alone value of the target firm is $ 20,00000 and as per the acquirer firm the value of the target firm can be increased to $30,00000 by change of management, then the value of control is ($30,00000-$20,00000) i.e., $10,00000. If the value can be enhanced to $40, 00000 by acquiring the firm completely then the value of synergy is ($40, 00000-$20, 00000) i.e. $20, 000000.


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