A Research On Enterprise Valuation Methods In M & A

Since the 90s of the 20th century, economic globalization is increasingly clear that the economic and trade activities between countries are more frequent, at the same time the world has also ushered in the fifth merger wave. China's economy has rapidly developed into a world economic power after implementation of market economy and especially after joining WTO, in the mean while China has become the active region and the world-wide mergers and acquisitions market. Although the company can rapidly expand by M & A means, there were a number of risks, and M & A failure cases have occurred, in which the improper valuation of target company is one of the main causes of failure.In the study of this topic, I went home and abroad with the literature on relevant topics, and the writing is in the on the basis of absorption and summing up. This paper describes the relevant theories about acquisition and valuation at the beginning, including M & A history, concepts and types, cause and effect and the concept of value assessment of enterprise and enterprise value, from which I summarizes the characteristics and importance of the value assessment of enterprise in mergers and acquisitions. I divide the value of the target business into three parts on the basis of the aforementioned, that it is their own value, the value of synergies and the option value. After in-depth exploration of the value of each part I choose the right assessment for each of them.Secondly, I focus on the theoretical review on the assessment methods of the value of each part: assets assessment method, market assessment method and the discounted income method to evaluate their own the value; Internal value-added model, segment sum method and discounted cash flow method to evaluate synergy value; real option pricing model to evaluate option value. Then a qualitative analysis, that is evaluation and analysis of each valuation method and the factors impacting the choice of assessment methods, on the basis of which I introduce the the probability of the M & A failures, and ultimately I create an assessment model: The total value of the target enterprise= Their own corporate value + (1-p) * (synergy value + option value).The model focuses on the combination of various assessment methods and assessment of the whole enterprise.Then, I apply the initial model in the case of Arcelor acquisition of Laiwu Steel, and I choose a more reasonable assessment through qualitative analysis on the acquisition process, the two companies in the M & A cases, M & A motives and the overall situation of steel industry. I make a comparative analysis of the outcome, and it is basically consistent with the fact, which confirms the feasibility of the model from the side.Finally, I summarizes the research process and results of this article, point the lack of the research and respects for further research.