Essay · M&A
How much synergy are you actually paying for?
In our M&A final project, Goodyear faced a $64 ask for Cooper Tire. Standalone, Cooper was worth about $43 a share. The real question wasn’t the valuation — it was how much of the synergy case the buyer was pre-paying.
Hizbawi MeresaSeptember 30, 2026 3 min read Includes an interactive model
Our M&A course final project in spring 2026 put our team in the role of independent advisers to Goodyear’s CEO and CFO. The question: Goodyear wanted to acquire Cooper Tire & Rubber, the seller was insisting on $64 a share, and management worried that was too high.
The case supplied the operating assumptions — sales growth, a 9.75% discount rate, and the synergy levers. Our job was to build the models, choose the comparables, and make a recommendation we could defend.
Start with what the business is worth alone
We built a standalone DCF from Cooper’s 2020 financials: cost of goods at 74.35% of revenue, SG&A at 9.70%, depreciation at 6.30%, revenue growth of 5%, 4%, 3%, and 3% through 2024 and 2% after, capital spending at 120% of depreciation, and a 27% tax rate. That produced an enterprise value of $2,044.8 million. After adding back net cash of $271.5 million and deducting an after-tax pension liability of $125.6 million, the standalone value was $43.08 a share — about 33% below the ask.
Comparables pointed in the same direction. Across seven tire makers — Continental, Bridgestone, Michelin, Goodyear, Hankook, Pirelli, and Yokohama — the median EV/revenue multiple of 0.85x implied $44.85, and the median EV/EBITDA multiple of 6.68x implied $54.09. We leaned on EV/EBITDA because it is less distorted by differences in capital structure.
Then price the synergies separately
The synergy case layered in faster growth (7%, 6%, 5%, and 4%, then 2.5%), cost synergies of 4% of cost of goods and SG&A rising to 5% from 2024, a working-capital release of 80 basis points of sales in 2021 and 50 in 2022, and $210 million of tax benefits in present value. With every synergy realized, Cooper was worth $75.84 a share.
The $64 ask sits between those two numbers. That is the key reframe: any price above standalone value is a pre-payment for synergies the buyer has not yet captured. So the useful question is not “what is Cooper worth?” but “how much of the synergy case does this price require?”
How much synergy does a $64 price assume?
Cooper Tire's value per share rises with the share of identified synergies Goodyear actually captures. Slide it and watch the gap to the seller's ask.
Synergies captured
50%
Implied value
$59.46
vs. $64 ask
−$4.54
At 50 percent synergy capture, Cooper is worth $59.46 per share, below the $64 ask by $4.54.
- Our fair range $54–$62
- Standalone DCF $43.08
- EV/Revenue comps $44.85
- EV/EBITDA comps $54.09
- 100% synergies $75.84
The $64 ask only pays for itself if Goodyear captures about 64% of every identified synergy — and integration risk in tire manufacturing is real. The deal ultimately priced at $54.36, at the low end of our range and within 1% of our EV/EBITDA comps.
At $64, Goodyear would need to capture about 64% of every synergy identified just to break even — before paying for integration risk across production networks and labor agreements.
The recommendation
We put fair value at $54 to $62 a share and advised opening at $56 and walking away above $62 without a detailed integration roadmap.
On financing, we recommended roughly 65% cash and 35% stock. All-debt financing didn’t work: Goodyear already carried $5.99 billion of debt against a $2.55 billion equity market value, and adding about $3 billion more would have pushed leverage beyond five times net debt to EBITDA. We also suggested a collar on the stock portion to cover the regulatory review period, and an earnout tied to synergy milestones in years one to three — structure as a way to push synergy risk back toward the seller.
What actually happened
On February 22, 2021, Goodyear agreed to acquire Cooper for $41.75 in cash plus 0.907 Goodyear shares per Cooper share — $54.36 at signing, a 24% premium to Cooper’s prior close. That landed at the bottom of our range, within 1% of our EV/EBITDA comparable value, and nearly $10 below the case’s $64 ask. The real deal was also a cash-and-stock mix, weighted more heavily toward cash than we proposed.
What I took from it
Keep standalone value and synergy value in separate models. Blending them hides the one number that matters in a negotiation.
Translate price into a capture requirement. “This price needs 64% of every synergy we identified” is a sentence a CEO can argue with. “$64” is just a number.
Structure is a valuation tool. Cash mix, collars, and earnouts decide who carries the risk that the synergies don’t arrive.