The Research Of Value Assessment Of Enterprise M&A Based On Real Options

As one of the inevitable trend of economic globalization's development,the key process of M&A is assessment of the target enterprise. It is a crucial step in procedure of the M&A process, and always full of risk. There are a lot of methods to assess enterprise at present,such as Assets Value Method,Market Value Method,Discounted Cash Flow Method,and so on.However,all of the traditional assessment methods provide a practical qualitative tool other than considering management flexibility in M&A process .On the base of the combinating the traditional assessment methods,Real Options Method makes up the defect and regards all kinds of investment opportunities and management flexibilities as options. It also assesses the investing opportunities in the future rationally.Meanwhile,it becomes a brand-new project to assess the uncertain opportunity value in the assessment of the target enterprise reasonably.On the base of combining the traditional assessment methods and the Real Option Method,this paper aims at setting up a new assessment model and seeking a new way to reflect the M&A value of the target enterprise more exactly,and offering a kind of thoughtway to assess the target enterprise.In this paper,the researching approach is to assess the M&A price by two parts.Firstly,it calculates the inherent value of target enterprise by Discounted Cash Flow Method;secondly,it finds out the M&A overflow by Real Options Method.To combine theory and practice,this paper follows the principle that qualitative analysis and qualitative analysis combined with case analysis,strives hard to apply the assessment theories to the practices.There are five chapters in this paper. The first one is the foreword which mainly introduces the paper research goal,meaning, and the domestic and international theories.Meanwhile,it confirm the basic structure,the critical content and the research technique tool. In the second chapter,the main content is the theory of assessment and an analysis of the three traditional assessment methods which is Assets Value Method,Market Value Method,and Discounted Cash Flows Method. Furthermore,it discusses their respective adaptability and limitation,and how to select a proper method to assess the enterprise practically. The third chapter expounds Real Option theory. Making reference to the thoughtway of Discounted Cash Flows Method,the paper sets up a new assessment model of the Real Options Method and introduces the mechanism inside and assessing process of the integrated model particularly. The fourth chapter is the part of the demonstration. By analyzing the case of Investment Company A mergering Bank B,it uses the new assessment model to assess Bank B and analyses the whole assessment process. The five chapter is Summarization. It puts forward some possible problems in the new assessment model and suggestions of perfect assessment.