Analysis Of Pricing Game For Enterprise Merger And Acquisition Based On Real Option

It’s a key step to set the purchase price for the target enterprise in the mergerand acquisition activity. Whether or not calculate a reasonable purchase price isan important point that two sides of M&A are very concerned about.Thetraditional pricing model is not applicable and can not reasonably determine theM&A price of target enterprise because it considers the merger and acquisitionactivity as rigid, inflexible, unbending and ignores the great potential value ofreal options in M&A. Because enterprise M&A activities has the features of realoption and M&A price negotiation has the characteristics of game playing, thispaper studies the M&A price in the uncertain environment based on the conceptof real options and game playing and establishes M&A pricing model under thecase of the acquirer bargaining with the acquired. The model incorporatesuncertainty of M&A activities, flexible management and bargain game factorsinto M&A pricing model of the target enterprise.This paper puts forward M&A pricing concept based on the real option andgame playing which is based on the defects of the traditional value evaluationmodel of target enterprise.Then this paper analyzes the real option characteristicsof M&A and game playing features of price negotiation to do the groundingworking for the core part research behind. The core content of this paper consistsof three parts. Firstly, this paper analyzes M&A price is determined by the targetenterprise entity value, the real option value of M&A and real option value losscoefficient based on certain assumptions and establishes M&A pricing modelbased on the real option concept and analyzes the advantages and limitations ofthis model in actual applications. Secondly, based on the above model, this papermakes some assumptions about the negotiation game between two sides of M&Aand analyzes the pricing strategies of game under the conditions of completeinformation and incomplete information and determines the M&A equilibriumprice of these two cases. Thirdly, this paper analyzes a real case under the condition of incomplete information and figures out the target enterprise valueand analyzes the equilibrium price after the game and compares the theory pricewith actual transaction price to prove M&A pricing model based on the realoption and game playing can price for the target enterprise more scientificly andmore reasonably.