Free cash flow to acquirer (FCFA)

Often in the news, a loss-making company is acquired for some high multiple (say, 10X to LFY revenue). People ask: why? And begin to hope for the same outcome, leading to regret when they get rejected on their proposal to sell the business. The secret is that the acquirer expects to extract the positive cash flows from integrating the target into its value chain. Take a look at the below decomposition:

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