An Analysis of the Value Destruction in AT&T's Acquisition of NCR

AT&T's $7.5 billion acquisition of NCR decreased the wealth of AT&T shareholders by between $3.9 billlion and $6.5 billion and resulted in negative synergies of $1.3 to $3.0 billion. We find that AT&T paid a documented $50 million and possibly as much as $500 million to satisfy pooling accounting, thus boosting EPS by roughly 17% but leaving cash flows unchanged. We conclude that AT&T's decision to acquire NCR in what the markte percevied as a value-destroying transaction was related at least in part to the 1984 consent decree with the Department of Justice that led to the break-up of AT&T.