The Real Options Approach In The Pricing Of Steel Mergers And Acquisitions

In recent years,the international iron and steel magnates have been abusing their merging purchase numerously,and heginning their expasion in china.The pace of the Iron and Steel Enterprises'meger and acquisition toward China is obviously speeding up.While facing with the oncoming-force opponents,which is an intevitable choice to strengthen themselves through merger and acquisition.The key for successful merger and acquisition is to make an appropriate calculation of target companies'value,but the troditional methods can not get the elastic value of management exactly.It can often understimate enterprise value when the investors use discount cash flow method to evaluate the enterprises.Enterprises merger and acquisition is a long-term strategic investment,because it not only can be reserved like common investment projects,and has the features of high risk and high profit,but also it has a lager management elasticity,uncertainty and typical option feature.It is suitable to be used in real option theory to evaluate the value evaluation and establish models of evaluation accordingly.A reasonable price is the key to improve the successful ratio of merger and acquision.However, the price is decided on its value,so value evaluation plays a crucail role in enterprise merger and acquisition. The article take the traditional valuation methods as the standpoint.Through an analysis of the traditional valuation methods, we propose a real option.In this paper ,we take the situation of iron and steel enterprises into consideration by using the real options method and making analysis in acquisition options feature for the steel companies and building a real option pricing model and based on which is good for us to research into how to take the real options evaluation model into use in the target business valuation.Then the theory is applied to the cases of real options and also analyzed the impact of the relevent parameters on the effect of options which causes a certain reference on the valuation process.