Study On Share Exchange Ratio In Stock For Stock Merge And Acquisition Of Listed Companies In China

As an effective method for optimizing the allocation of resources, M&A has become the eternal topic in capital market. With the increasing maturity of China’s capital market and improvement of the relevant laws and regulations, the demand for capital is not only simply reflected in cash transactions, but also in stock for stock M&A for listed companies, which provides the greatest possibilities for companies’ expansion."State Council’s Opinion on Optimization of Corporate Mergers and Acquisitions’ Market" was introduced in March,2014. In this document, there are rules about reforming the M&A share pricing mechanism and increasing the flexibility of pricing. This document also allows the implementation of negotiated pricing of unlisted companies’mergers and acquisitions, which means people pay more attention to domestic mergers and acquisitions and negotiated pricing.Based on the summary of exchange ratio calculation methods, this paper analyzes the equity valuation methods through case analysis, using value per share to determine the exchange ratio and applying L-G and its optimization model to estimate the interval, trying to reflecting the wealth effect and synergistic effect in stock for stock M&A. Finally, I analyze the results of this case and empirical results, focusing on a realistic assessment of the case. When there is discrepancy in assessment, I analyze synergies through analysis of its long-term observation of the stock and get final conclusions.The conclusion include3parts:1. In different circumstances, choosing share exchange ratio evaluation model is important point;2. The use of equity cash flow discount method and assessment methods lead to different results;3. There is some limitations of L-G model and L-G optimization model reflect little effect on the synergies in stock for stock M&A of listed companies. In addition, this paper analyzes L-G model application in detail and make recommendations for L-G model and the optimization model in practical application.In this paper, I concentrated on3parts:1. Solve problems from the perspective of assets valuation analysis;2. Do detailed analysis using the existing financial data of listed companies in stock exchange;3. Use L-G model and examine the result of the cases, and attempts to reflect the synergy effect.