Acquisition Evaluation On The Case Of Jili Acquired Volvo Based On The Real Option Methodology

In current background of economical globalism, enterprise expanding and requirementof reinvestment is getting more and more stronger, when an enterprise is going to make adecision under circumstance of uncertain investment environment, real option is become avery innovation and practical tool. It is significant to strategic investment of target enterprisevalue assessment during acquisition.Firstly, the article is given investigation status of abroad and domestic, then point out thelimitations of Discount Cash Flow method, and introduces the real option concept andintroduce two main real options models, Black-Scholes Model and Binary Tree Model.Secondly, regarding to the value assessment during acquisition is also being furtherdiscussed. And to use a case to analysis and prove, the investigation case of Jili acquiredVolvo, including the analysis of acquisition background, strategic real options and financialdata.At last, due to the acquired target enterprise under uncertain circumstance and negativeNPV, thus not a proper situation to use traditional method, then we use the ENPV, and useBlack-Scholes Model and Binary Tree Model to evaluate the target enterprise value, themarket value, to verify the real options effectiveness and operational.