Research On Value Assessment For Target Company In The Mergers And Acquisitions

In recent years, with the rapid development of M&A markets in China, the amount of mergers andacquisitions and the number of cases have reached an unprecedented level. Mergers and acquisitions havebecome an important way for the fast growth of enterprises. Statistical data in the China SecuritiesNewspaper in2012showed that the number of the completed M&A cases in China in2011were2607,asthe proportion of9.27%in global. And transaction amount was$161.976billion, up to6.49%of the totalglobal share, in fourth place in the world after the United States, Japan and the UK.Although the M&A market have developed rapidly, we can discover that acquisition failures arenumerous in the domestic and international practice. Obviously mergers and acquisitions do not alwaysbring benefits for the acquiring company. However, in the most cases, it will be harm to shareholders’wealth, and even lead to bankruptcy of corporate. This is called the "success paradox." Related statisticsshow that about70%of M&A cases in the worldwide have little positive effect, even in failure. Thesuccess rate of mergers and acquisitions is less than western countries.The great difference on M&A rate of incidence and success caused great concerns with the academicsand practitioners. Existing studies suggest that the reasons of failed merger cases are the lack ofacquisition-related theoretical guidance and related technologies method support to large extent. Comparedwith western countries, M&A related research started lately and its core issues involved is the lack ofin-depth and meticulous research in China. Researches on value assessment for target companies are lessand are the lack of systematic. However, the acquisition of the target business valuation is extremelyimportant. Value Assessment for Target Company in the Mergers and Acquisitions is very important.Because the target enterprise valuation is not only the most important feasibility analysis, but also the basisfor the next step in mergers and acquisitions.Therefore, this paper, on the base of the existing literature review about target enterprise valuation inthe domestic and international mergers and acquisitions, has summarized the existing valuation theory, andalso has summarized and groomed the existing related value assessment methods. At the same time, thispaper has given evaluation on the advantages and disadvantages and scope of each method. What’s more,this article also has built a more scientific process of target enterprise value assessment combined with ourbackground. Finally, combined with the latest acquisitions case on Chinese Medicine acquiring to TianfangPharmaceutical, this paper concretely and systematic elaborated the application of the discounted cash flow method inpractice. The related research results in this paper provide a useful reference in understanding M&A target enterpriseassessment method and its application.