Pricing Issues In Enterprise M&A Based On The Application Of The Theory Of Real Options

The enterprises’ growth modes are nothing but “intensive growth” and “extensivedevelopment”. M&A is an important way for the enterprises to achieve the rapid extensivedevelopment. Having realized the initial intensive growth， the enterprises always choose thisshortcut which leads to new revenue growth opportunities， product structure adjustment，market’s tactical upgrade and even another big leap. M&A deal is a complex project whichinvolves multiple interests， multilateral game playing and many working procedures such as duediligence， determination of deal structure， deal negotiation and M&A pricing， which alwaysmakes all participants feel complicated. At all events， M&A pricing is undoubtedly the centralpart of the whole deal， as well as the high incidence area of contradictions within all participants.It’s so important that has the bearing on the success of M&A deal. Therefor， the rationality inM&A pricing is obviously significant for M&A deal.M&A pricing is the core part of this study. In this paper， the author combs the course ofdevelopment of M&A pricing methods， and analyzes the dilemma of the traditional pricingmethods in the M&A practice in the case of DCF model method. Meanwhile the paper introducesthe idea of real options into the M&A practice. Based on the analysis of the options charactersappearing in the M&A practice and “options group”，the paper finds that the real options have theimportant value in M&A pricing which couldn’t be ignored. The paper tries to establish the frametheory of real options valuation， pricing the connotive growth options of M&A， replenish thepricing theory of M&A， and explore the application of real options valuation in the practice ofM&A.