Evaluation Of Target Corporations In M&A Based On Option-Game

With the acceleration of the global economic integration, M&A has become atrend in the world. Whether M&A can be successful or not, the primary question is toreasonably assess the value of target corporations.Combined qualitative analysis with quantitative analysis, this dissertation usesdomestic and international theory and experience of corporation evaluation, exploresthe basic theory and practical problem of corporation value, corporation evaluationand correspondent methods, in order to establish a theory and method system asguidance to corporation evaluation.(1) This dissertation gives an analysis on three traditional methods of corporationevaluation. That is, discounted cash flows, market comparative methods, assetsvaluation. Furthermore, it discusses their respective adaptability and limitation, andhow to select a proper method to evaluate a corporation practically.(2) This dissertation gives a brief review of real option theory, uses optionpricing theory to analyze the value of growth option, option to abandon, flexible option anddelay option in the M&A strategy, and analyzes option to abandon in a creative way.(3) The author systematically introduces the newest development of modernM&A decision-making theory and: option-game theory. Based on option-game theory,the author analyzes the strategies and behaviors of M&A under the conditions ofcompetition by establishing corresponding option-game models. The conclusions are:under the case of competition, corporations will select the optimal M&A timing bycomparing with the tradeoff between the benefits of option value and the strategieslost of competitors'preemption, because the preemption of competitors will reducethe ability of corporations to delay M&A. As is seen, the evaluation of targetcorporations will be affected somehow because of the existence of competitors.Therefore, the application of option-game in the evaluation of target corporations canmake the decision of M&A more exactly.The ultimate aim of M&A is to increase corporation value. The application ofevaluation technique into M&A decision reflects the value concept of moderncorporations, which plays an important role in strengthening the ability of decision,improving scientificity of decision, and avoiding decision risk.