Research On Enterprise Value Assessment Issues For M&A Of The Pharmaceutical Industry

With the continue development of global market economy,Merger and Acquisition,as animportant means of allocating social resources,has become an unstoppable trend.The earliest Merger andAcquisition happened in the United Sates on1897.Then,it was roughly divided into five M&A waves,andeveryone of them promoted industrial restruction and upgrade of the entire society.Our M&A historystarted from Baoding Textile Machinery Factory acquiring Knitting Equipment Factory in1984,and wasshort.But with the quick reformation of economic system and deep adjustment of industrial structure of ourcountry in recent years,China’s M&A activity has entered a high-speed developmental period.Under the background of the M&A scale expanding gradually and the pharmaceutical marketdeveloping continually in China,the pharmaceutical industry,as an increasingly important and widespreadinfluencing field,whose M&A activity is more active than ever,occurs many remarkable merger cases.ButM&A activity is a complex economic behavior,and easily leads to assessment bias,coupled with thesmall-scale of china’s pharmaceutical enterprises,asymmetric information and improper evaluationmethod.In fact,the result of China’s M&A in pharmaceutical industry does really not ideal and thephenomenons of high premium acquisition and failure are common occurrences.Tracing the source,themain problem is the unreasonable value assessment result of the target company.Strengthening the study to value assessment of target enterprise has an effect on improving thesuccess rate of M&A.Therefore,This article takes the M&A and enterprise value assessment theory astheoretical basis,and explores our pharmaceutical industry’s characteristics,status,behavioral characteristicsand motivations of M&A activity to discover some issues about value assessment existing M&A activity ofour pharmaceutical industry,also gives some thoughts and suggestions.The purpose is to bringenlightenment in M&A activity of pharmaceutical industry in practice,and achieves a more scientific andaccurate value assessment result for pharmaceutical companies.Finally,the article has a valuation analysisof RenHe company acquiring JiangXi ShanLiang company,and hopes to be benefit for the M&A valuationpractice of pharmaceutical companies.The article discusses according to the above ideas:Firstly,introduction,it introduces the researchbackground and significance,domestic and overseas research status of enterprise value assessment,contents, research methods,and innovations.Secondly,the theory outline of M&A and valuation theory,it includes theconcept,types,motives and payment methods of M&A,also recalls the four methods of enterprise valueassessment:the cost approach;market approach;income approach;real options method,and summarizesseparately their applicability,merits and demerits.Then,on the basis of M&A market’s development andcurrent situation of pharmaceutical industry,it analyses the M&A motives of pharmaceuticalcompanies.Based on the theoretical and practical analysis,The article reveals the problems of enterprisevalue assessment in the M&A process of our pharmaceutical industry,and puts forward recommendationsand suggestions from the government behaviors,assessment methods,the role of intermediaries.Finally,Thearticle ends up with the case about RenHe company acquiring JiangXi ShanLiang company,and valuatesthe value of target company with the Discounted Cash Flow model,and concludes the research results.