The usual value of equity is the cash it can generate. This is a wordy way of saying:
1) that some businesses will be profitable short term, and some in the long term and it can be worth sacrificing one for the other as you end up with a more valuable business, and,
2) sometimes you sell a business for a lot more than its value as a standalone business, for various reasons - for example it lets a big business fill in a gap in their product line, or remove a potential future competitor, or remove a low cost alternative to their existing services/products, or help them sell more of something related, or gather more data..... or are just irrational at times.
The phenomenon in two is common in technology businesses, but is not common elsewhere. its most common during bubbles.
that's a good point about the strategic value exceeding the standalone business value... i think a lot of acquisitions are driven by that, especially in tech. it's interesting how much "potential" gets priced in, even if it's not immediately obvious how that potential will be realized.
It is usually the justification trotted out to justify acquisitions.
In general (not tech in particular) it turns out to be false more often than it turns out to be true. Large acquisitions tend to lose shareholders money but benefit management (because they profit more from running a bigger business).
1) that some businesses will be profitable short term, and some in the long term and it can be worth sacrificing one for the other as you end up with a more valuable business, and, 2) sometimes you sell a business for a lot more than its value as a standalone business, for various reasons - for example it lets a big business fill in a gap in their product line, or remove a potential future competitor, or remove a low cost alternative to their existing services/products, or help them sell more of something related, or gather more data..... or are just irrational at times.
The phenomenon in two is common in technology businesses, but is not common elsewhere. its most common during bubbles.