The Value Of The Target Enterprise Evaluation In Mergers And Acquisitions

Nowadays, Mergers and Acquisitions (M&A) has been an unstoppable global trendwith the continuous development of the market economy and the intensity competitionson its fifth wave across the world. The valuation of the target company is a core part inM&A and the choice of valuation methods is the key in the valuation process. Therefore,the research on the target company valuation in M&A can enrich the company valuationsystem，improve the accuracy of valuation results and promote the healthy and rapiddevelopment of M&A market and capital market in China, which indicate that thepresent study has important practical significance.In the present study, theoretical and empirical analysis methods were utilized toinvestigate the application of the target company valuation in M&A. Based on theexisted theoretical and empirical of company valuation methods in domestic andinternational business, the basic theories of M&A and company valuation methods wereintroduced. The aspects which influenced the process and the significance of the targetcompany valuation methods in M&A were analyzed. Subsequently, three mainenterprise valuation methods: asset-based approach (cost method), the market approachand income approach were discussed. A comparison study on advantageous, scope andpremise of the three methods was conducted and the current status of these threemethods was brief described. The methods proposed in the present study were to utilizethe asset-based approach (cost method) as the base and validate with the free cash flowincome model in income approach based on the previous analysis.A case study of company M acquisition of Company H was conducted in theempirical part of valuation process, which combined with industry environment,business and financial data of company H. The valuation of various assets in companyH was first carried out with asset-based approach (cost approach) and an integralassessment was conducted by free cash flow model in income approach. The final valueof company H was determined based on the income approach after a comparison of theresults obtained by the two methods. In the end, the existed deficiencies in the empiricalcase were summarized and prospects and recommendations of target company valuationmethod valuation method in M&A were proposed.