In this work out, we're asked to calculate the offer premium and the value created So we start with the offer premium To calculate this, we compare the offer price per share to the unaffected share price So I'll take the offer price divided by the unaffected share price, subtract one And we can see that an offer premium of 22.4% is being paid Okay, so why are we overpaying for this? Why are we paying this premium? Probably because of synergies So the present value of synergies and they've been given to us, 1,800 How much is the value of that premium? It says 22.4%. But what about in absolute terms? Well we firstly take the absolute premium per share and that's your offer price minus the unaffected share price But we now multiply that up by the number of shares So the premium in absolute terms being paid is 906 And even though we're paying 906 over the current equity value, that then gains us 1,800 of synergies This looks like a really good deal at the moment, so the remaining value for the buyer is the difference 894 A few things to be aware of is of course, the greater the premium being paid (let's say I put that up to 1,200) Then that reduces the remaining value for the buyer. If we put it up to 1,500, the remaining value goes down So do be aware, the higher your premium, the less that's left over for you In addition, the higher the risk that those synergies might not occur The less you should be paying. But that extra risk should be accounted for by a higher discount rate used in the present value of synergies So that 1,800 holds, the value given to the shareholders or the premium At the moment thus this deal looks like a relatively good one