The Assessment Of Target Enterprise In Merger And Acquisition

As a strategic method and investment behavior, Mergers and acquisitions (M&A) could help corporations involve in even broader scope of business and market sectors. Because of the healthy development of the global economy, Fierce market competition forces companies to speed integration and adjust the industrial structure on a global scale. A new round of mergers and acquisitions wave is in this context, rapidly. A global M & A research, made by HewittAssociates.LLC, indicated that many companies wanted to reduce costs, consolidate resources or scale effect by M&A. All of them mentioned synergies, by which they hoped to establish a new competitive edge to cope with the economic cycle and changes in the market brought about the impact to the enterprise. Visibility, M&A is attractive for corporations nowadays.However, not all the merger is successful. A research of M&A made by KPMG detected that 30% of enterprises in the merger proceeds severely reduced, and 20% of them reduced earnings, 33% only made some marginal benefit, only 17% of the enterprises in the merger after merger has been made obvious multiplier effect. The reason for this result is not only the integration adverse or invalid, but also the unreasonable pricing in M&A. So it's the key factor to improve the success possibility of M&A to evaluate the reasonable value of target enterprises.Starting at analyzing the meaning of target enterprises value in M&A, this thesis the added value are based on uncertainty of M&A and potential synergies. On the one hand, it would analyze the applicability of the traditional methods to assessing the enterprise's value, and choose the most complete assessment of the intrinsic value of target enterprises. On the other hand, explaining the real options feature of M & A activity and its impact to the target enterprise's value, it will advance the feasibility of using real options pricing to assess M & A activity's uncertainty. Thirdly, combining the Fuzzy Comprehensive Test and AHP to recognize and assess the added value, made by potential synergies. As a whole system, this article analyzes the composition of target enterprise value, and forms a complete analytical framework.There are 2 points of innovation in this paper: At first, bringing the value of the target enterprises into the whole M&A activity, and analyzing the added value. Secondly, calculating the added value made by potential synergies by the Internal Measure, recognizing and assessing the achievement of potential synergies by Fuzzy Comprehensive Test, and allocating it between the buyer and target Enterprise by AHP.The thesis contains 7 chapters and is divided in 4 parts.The first part, namely the chapter 1, indicates the research background and significance of this thesis, and introduces the ideas and methods. By elaborating the current situation of global trends and China's M&A activity ,this chapter the significance of evaluation in M&A. In the next place, introducing the domestic and foreign scholars on the enterprise value and the value of m M&A in the target enterprise view and assessment of research results, as the bases of methods for the thesis. At the same time, there is a brief introduce about the ideas and basic framework of the thesis.The second part analyzes the component analysis of target enterprise, including chapter 2 and 3. The chapter 2 describes the M & A related theory, and emphasizes the important role of evaluation in M&A. The chapter 3 tells about the different types of enterprise value and analyzes the real options feature of M & A activity and its impact to the target enterprise's value. It is explained that the target enterprise value includes its intrinsic value, and the potential added value, which consists of added value coming from uncertainty of M&A and potential synergistic effect.The third part, namely the chapter 4,introduces kinds of methods about how to assess the value of a corporation. There are traditional measures, NPV, Comparison Method and Cost Method. The Binary Tree Model and B-S Model are used to count the value of uncertainty in M&A.The forth part, constructing and applying the model, is the chapter 5 and 6. The former constructs the model that the target enterprise's value includes intrinsic value, option value of M&A and added value made by potential synergistic effect. The latter illustrate the application of the model by analyzing the case of Group H and Corporation F.The chapter 7 would summarize the research conclusion of this thesis and indicate the lack of it. There would be a expectation of the empirical study in assessing the target enterprise value.