Multiple expansion is one way that firms can create value through acquisitions.

Name: Multiple expansion is one way that firms can create value through acquisitions.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The concept of multiple expansion is that the P/E multiple of the low-P/E company will expand to the level of high-P/E company after the acquisition. However, multiple expansions do not create value in themselves. If there aren’t specific sources of increased cash flow, there will be no long-term value creation.

Multiple Expansion Is One Way That Firms Can Create Value