M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Tuesday, August 24, 2010

3Par Valuation ... "Bonkers"

So says the FT:

HP may trump its rival– but to do so it has put a valuation on 3Par that is, frankly, bonkers.

Unless, of course, there is value in needling your rival:

Perhaps the price factors in the value of annoying and distracting Dell. The one-time largest manufacturer of PCs has fallen into third place, and is still trying to make a multi-year turnround plan work. So, while Dell would receive a $54m break fee, and make a handsome profit on its one-third stake in 3Par, management time and energy will have been wasted. HP might be able to gain share for its $35bn PC business.

Just a reminder that in many acquisitions, things sometimes move very quickly away from rational questions of valuation.  Sometimes, it just doesn't matter what the price is, even if it's too much.  Reuters' DealZone a couple of weeks ago made a similar observation when it noted that deals in the coal business aren't always about business:

“We are talking about being big personalities who know each other going back decades … There is a really big CEO that I know in the industry who lost a girlfriend to somebody else years and years ago when they were in high school and to this day, he still hates that CEO.”

And so it goes.



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