Target Companies In Mergers And Acquisitions Valuation

It is important to price the target company reasonably,which decides that whether the M&A is successful. If the bidding price is too high, the premium paid to the target company is so high that the merger loses much. If too low, the shareholders of the target company won't convey their shares, evenly it is possible to occur to the bid for the acquisition that leads not to reach the goals for the mergers. How to price the target company is top financial problem in the process of acquisition. There are many methods to evaluate the target enterprises. Every way has the side of science and legit and the other side of deficiency. The author of the thesis thinks that the motives of acquisitions decide the types of acquisition that decide the methods of evaluation of the target. This article intends to classify the acquisition into two kinds: financial acquisition and strategic acquisition based on the motives of acquisitions, and explains the corresponding evaluation methods accordingly. That aims at instructing the practice of the M&A. This article includes six parts. The preface is the overview of the composition. Chapter one narrates all kinds of theories of merging motives comprehensively, and analyzes the status quo of the acquisition domestically and abroad. Chapter two exposes the features of the two new types of the acquisition. Financial acquisition is profiteering, focuses on the cost and efficiency, and is a mean of whitewashing the financial statements. Strategic acquisition is the consequence of consideration out of strategy and focuses on the synergy after acquisition. Chapter three introduces the methods of evaluation when financial acquisition, such as DCF(discounted cash flow), MV(market value), and AO(assets orientation).The case of this chapter is to evaluate ZOOMLION(SZ000157) by the means of FCFE(free cash flow of equity). Chapter four exposes how to evaluate the synergy of strategic acquisition from the angles of taxation effect, operational synergy, financial synergy and company growth opportunities. In this chapter, the author analyzes the Lenovo(HK0992) took over IBMPC on the intention of strategy. Chapter five is the conclusion of the article. Here, the author encourage the enterprises to practice the acquisition based on the strategy, suggest to make due diligence before acquisition and pay attention to the human capital of the target company. This article emanates many cases to support the views, and refers to many research works. The novelties in this article are following: 1 puting forward the new classification of acquisition based on the motives; 2 creating the new thinking that employ different evaluation according to the new types of acquisition; 3 analyzing the increments from the consolidation of strategic acquisition systemically. Of course, there are many shortcomings in this article. For Example, the quantitative analysis on the human capital from the target company is not made subject to the money measurement in accounting; the arguments in the case of Lenovo are not abundant due to little information.