OPM In M&A Valuation

Enterprise M&A is the derivation of market economy and modern enterprise system, which has more and more important position in our country's economic life, while valuation is the key factor about it's success. Modern enterprise aims to realize the maximum value, however, uncertainty is one of its most obvious feature. So, whether the investment opportunity can be caught under such an uncertain condition will have great impact on the value of the enterprise. Since the opportunity value of the target enterprise weighs much more during M&A, it has become an unintegral part of the target enterprise's value.According to the orthodox valuation methods, though the DCF is a more mature method, it still cannot evaluate the target enterprise's uncertainty value, neither do other methods, which makes them face a lot of challenge. Nevertheless, in the financial economics field, OPM can be adopted to make a correct valuation on the uncertainty opportunity value of the financial investment Since M&A has the feature of option, it is nature that OPM can be adopted to valuate the target enterprise during M&A under some hypotheses. The most significant feature of OPM in M&A is its effective valuation on the uncertainty opportunity value, and a more correct valuation result will be got if the DCF and OPM can be used together by dividing the value of the target enterprise to asset value and opportunity value. The adoption of OPM will undoubtedly embody the development opportunity of a company, thus making the result of valuation more reasonable, which is helpful to catch the M&A opportunity and improve the success possibility.