Issue Information ‐ TOC

• DOI: http://doi.org/10.1002/jcaf.22133
• Date: 01 January 2016
• Published date: 01 January 2016

VOLUME 27, NUMBER 2 • January/February 2016

The Journal of

Letter From the Editor

James B. Edwards

Features

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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