In September 2014, the German engineering and manufacturing company Siemens
announced the plan to acquire the American manufacturer of oil and gas equipment and
service provider, Dresser-Rand for 83ashare.Inastandalonevaluation,Siemenscanbevaluedbetween€87and€104andtendstobeundervalued.Contrarily,Dresser−Randappearstobeovervalued,sincethecurrentmarketpriceof68 is at the upper valuation range of 36to88.1
Additional revenues and reduced costs, ex transaction and implementation costs are
worth 141to458 million and may add synergies of 1.8to6 a share to the
standalone value of Dresser-Rand.
Despite the fact that Dresser-Rand fits into Siemens’ Power and Gas division from a
strategic point of view and that the M&A sentiment is currently beneficial to tap into the
M&A market, an acquisition price of 83seemstobefairlyhigh.Siemensshouldnotrealizethedealandofferapremiumof21recommendsanacquisitionpricerangeof47 to $73.2
This case study shows that the world of M&A is fascinating, but also complex. Bid-prices
and valuations often substantially diverge – depending on the strategic fit and potential
synergies. The thesis mentions shareholder pressure, unsuccessful recent acquisition
activities, legal & technological burden, high cash balances and personal interests as
reasons for Siemens’ high premium