Thanks for the prompt.
I tend to agree with both Michael and Charles’ comments above. The premium (or increased value that the bidder is willing to pay above the value of the company) is ultimately justified by a synergy analysis to determine where value can be derived, from both a front-end (sales/revenue synergies) and back-end (operational synergies) perspective. It’s quite rare that companies who pay a high premium will be able to realize the ROI or performance indicated at the time of the deal, but there are cases where very significant value can be extracted if the acquirer is able to leverage new customer channels to increase revenue, remove duplication of back-end (HR, finance, IT) processes, consolidate operations, and/or receive access to a new market. Obviously every deal is different, but in a lot of cases the premium can be justified to the board at the time of the deal. The performance of the transaction is a very different story 🙂