Analysis Of The Pricing Decision Of Enterprise Merger And Acquisition Based On Option Games Theory

Merger and acquisition (M&A) is an important strategic investment, which can help a firm realize external growing. Along with the development of the market economy, the global M&A have been increasing. Pricing decision of M&A is very important. It is the most technical part in the progress of M&A's pricing decision, which usually determine the M&A' s success and failure directly. The traditional methods for M&A's pricing decision is based on certainty, complete information, and ignoring competition. This paper uses option game theory to study M&A's pricing decision. We consider target enterprises' assets value sufficiently. At the same time, we bring factors, such as management flexibility, uncertainty of information and competition, into the system of M&A's pricing decision. Then, we can make the decision more scientific and reasonable.This paper is begun with the study on the development of option game theory and its application in M&A's pricing decision. Then, we analysis the main ideas and theory frame of the option game theory, and discuss the possibility to analysis investment with the theory. In this part, we offer the paper the base of theory and frame. The nucleus of the paper includes two parts. In the first part, we divide and define the progress of M&A's pricing decision based on science, and identify the characteristics of option game .We think that the lowest price the target enterprise may accept is the assets value of the target enterprise, and the highest price the major enterprise may pay is the sum of the assets value of the target enterprise and the options value of M&A's. So making M&A's pricing decision is to look for game equilibrium between the main body in the M&A. Based on the analysis above, the paper offer a function and a method about M&A's price. In the second part, discuss the methods and models to calculate value in the function, point out game models to analysis the competition quantitatively between target enterprise and major enterprise, and target enterprises. At last, we simulate a case about M&A to make M&A's pricingdecision with the result. It verifies the feasibility of the result applied to practice.