Deep Science or Voodoo

Last week Dennis Berman, in an article entitled “One Key Number in Pricing a Deal: the 52-Week High,”1 laid bare the science of pricing an M&A deal. He reported on a study by Harvard Business School’s Malcolm Baker et. al., which concluded that psychology plays a major role in pricing deals. “In particular, it is one number, the 52-week high for a company’s stock, that matters most…The 52-week high stock price has always had a fetishistic role in merger discussions. By custom, boards are insulted if a merger offer doesn’t breach this price level. Banker presentations focus on whether an

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