Issue Information ‐ TOC

Date01 January 2016
Published date01 January 2016
VOLUME 27, NUMBER 2 January/February 2016
The Journal of
Letter From the Editor
James B. Edwards
The Misvaluation Curse in Mergers and Acquisitions
Luis E. Pereiro
When corporate acquirers become self-mystified by an overly optimistic picture of potential
merger gains, they end up trapped in high-sided valuations, overbid, and eventually overpay
for targets—and so destroy their shareholder’s value. But there is a flip side too: pessimistic
acquirers who systematically underbid end up consistently bypassing potentially profitable
acquisition deals. Both faces of misvaluation are rooted in cognitive biases which, being reflex
rather than volitional, are difficult—but not impossible—to curb. We suggest four strategies
to dilute the misvaluation curse.
M&A Due Diligence: Consideration of Fraudulent Financial Statements
Jo Ann McGee and J. Ralph Byington
Merger and acquisition (M&A) deals help companies grow quickly. However, these types of
deals do not come without risks. Corporate management should be aware that when they
are conducting M&A due diligence, they should exercise caution in regards to the existence
of fraudulent financial statements (FFSs) because of the severe consequences related to
FFS. The purpose of this article is to familiarize corporate management with the common
fraud schemes employed to create FFS and the red flags that signal the potential existence
of these schemes.
Uncover the Truly Maximum Profit Opportunity of a Prospective M&A Deal:
NextGeneration M&A Financial Analysis Capability
Alan Dybvig
By integrating three analytic techniques already in use, separately, for merger and acquisition
(M&A) financial analysis, it will be demonstrated that an optimized income statement (OIS)
represents a “next generation” financial analysis capability for M&A and private equity port-
folio management. The three techniques currently in use are (1) mixed integer and linear

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