Real Options Valuation In M ​​& Enterprises

Along with the process of economic globalization, mergers and acquisitions havebecome increase greatly. M&A is an important way of resource integration and optimizeconfiguration of corporate resources, at the same time, one of the core issue of M&A is thevaluation of target companies. Quantitative assessment tools commonly used in mergersand acquisitions valuation methods provide a practical qualitative tool other thanconsidering management flexibility under uncertain circumstances in M&A process.Therefore, sometimes the traditional methods which neglect the uncertainty in M&A doesnot able to fully evaluate the value of the target company, would be misleading to bothparties to make the wrong decisions, and even loss some rare investment opportunity.Application of real option valuation theory in M&A, can well make up the defect thatthe traditional method’s lack of applicability. The Real Option Method emphasizes thevalue of strategic level that M&A brought about, and also emphasized the attention andtreatment methods for the uncertainty and risk of enterprise. It can be said that real optionmethod can provide a new value perspective and mindset to enterprises which help tore-take the opportunity and avoid the risk.This dissertation introduces real option theory system and thus further describes theapplicability and effectiveness of the application of real options valuation method in M&A.Based on these theoretical analyses, this dissertation uses the mergers and acquisitions of Ncompany as a sample for research. The application of real option method approach to thevaluation of N company provides a feasible example for the application of real optionmethod in the evaluation of merger and acquisition.Finally, this dissertation alsomentioned the problems and limitations of the real options method may exist in the actualapplication process.