Research On The Model Of Value Evaluation Of Target Enterprises In Strategic M&A

Since the1990s, the trend of economic globalization has become increasinglyobvious and the development of the field of international economy and trade has beenoften changing. At the same time, methods of accelerating enterprise expansion andstrategic development are constantly innovating. As an important means of theoptimization of the allocation of resources, the effects and benefits of the mergers andacquisitions has been proved by time and are becoming more and more appreciated bymanagers. Especially now, in the shadow of the2008financial crisis, with opportunitycoexisting with pressure, all the industries are actively making strategic adjustmentsand using to implement enterprise expansion. Although m&a is one of the ways forcompanies to become stronger quickly, there are a lot of risks and m&a failureshappens occasionally. The improper value evaluation of target enterprises is one of themain reasons for the failure.Based on summing up domestic and foreign related research results, combingwith the actual m&a cases, for the difficulties of the method of value evaluation oftarget enterprises in the actual m&a cases, firstly this thesis has analyzed the mainmethods of value evaluation of target enterprises comparatively. Then the thesis hasanalyzed the influence factors of choosing methods of value evaluation of targetenterprises in strategic m&a systematically. Thirdly, the thesis has proposed themethod of value evaluation of target enterprises and has explained the application ofthis method illustrated by the m&a case of Ping An Insurance and Shanghai JahwaUnited to validate its feasibility. Finally, the corresponding countermeasures andsuggestions has been put forward.The thesis is divided into six parts as follows:The first part is the introduction. It mainly introduces the background,significance and purpose of the research, explains the research idea and structure ofthis thesis and illustrates the methods and tools used in the process of research.The second part is the related concepts definition and literature review. First ofall, the four related concepts, mergers and acquisitions, strategic m&a, synergistic effect and value evaluation of target enterprises are defined. Then, the thesis sums updomestic and foreign research results of value evaluation of target enterprises,analyzes the present research situation and defects.The third part is the comparison of main methods of value evaluation of targetenterprises. Firstly the thesis analyzes applications of all kinds of domestic evaluationmethods descriptively, then divides methods of value evaluation of target enterprisesinto two dimensions of "traditional" and "developmental", and divides the traditionaltype into three dimensions of the method based on assets, the method based onbenefits and the method based on market. In the developmental type, three modelsapproved in the practice are selected: the economic value added model, the optionpricing model and analytic hierarchy model. Finally, the advantages, disadvantagesand adaptabilities of the methods above are summarized.The fourth part is the influence factors of choosing methods of value evaluationof target enterprises in strategic m&a. The thesis states that matched evaluationmethods should be selected according to different features of influence factors. Thischapter is divided into three dimensions of macro, medium, and micro. The macrolevel is divided into market efficiency and other uncontrollable factors. The mediumlevel is divided into industry type and industry maturity. The micro level is dividedthree aspects, the acquirer, target enterprises and intermediaries.The fifth part is the application of in the m&a case of Ping An Insurance andShanghai Jahwa United. This thesis selects a typical domestic strategic m&a case inthe Chinese listed companies-the m&a case of Ping An Insurance and ShanghaiJahwa United as an example to validate the model of value evaluation of targetenterprises builded in the third and fourth part and demonstrates its feasibility andscientificalness. Through case analysis, the thesis applies the model to the targetenterprise Shanghai Jahwa United. Based on the qualitative analysis, the basicsituation and the motivation of the m&a case, the book value method is chosen as thepricing base of the target enterprise’s value, discount cash flow method to quantifyV1,the own value of the target enterprise. And the option pricing method is used innovatively to quantifyV2, the synergy effect value of the target enterprise. Theultimate value of the target enterprise is consisted ofV1andV2.The sixth part is research conclusion and prospect. The research process andresults of this thesis is summarized, the shortcomings are pointed out and furtherresearch prospect is put forward.The possible innovations of this thesis mainly includes: firstly, the thesis hassummarized methods of value evaluation of target enterprises comprehensively,explains the advantages, disadvantages and adaptabilities using vivid figures andtables and can summarize better. Secondly, the thesis has analyzed the correspondingmethods of different m&a motivations, and uses more vivid charts. Thirdly, the thesishas reclassified values of the target enterprise in strategic m&a and divides the valuesinto own value and synergy value of the target enterprise, then uses different modelsof evaluation to estimate more comprehensively. Moreover, in practice applications indiscount cash flow and option pricing models, the thesis has revised fixed values ofmodel variables appropriately, making them more feasible and accurate.