Case Study Of NavInfo's Equity Valuation Based On Real Option Method In Tecent-NavInfo Acquisition

With the continuous development of world economy and the internationalization level being higher and higher, the competition between different enterprises has gradually intensified, and so have the merge and acquisition activities. Merge and acquisition is an action for enterprises to realize resources integration and optimal allocation, in which the most important one of all core issues is enterprise valuation. Among all enterprise valuation methods, those rigid quantitative analysis ones are used in usual. However, those methods neglect the environment changes during the process of merge and acquisition enterprise, from which enterprises could have achieved option value. Therefore, with those traditional valuation methods, the value of target enterprise cannot be well reflected, which might lead to a consequence that both sides cannot make a reasonable judgment and analysis for enterprise value, and the cooperation goes failure. Under such circumstance, real option theory has been introduced in enterprise valuation methods system to deal with the uncertainty of enterprise valuation in merge and acquisition activities. This dissertation demonstrates that real option pricing method plays a good role in enterprise valuation of merge and acquisition, by illustrating that real option theory can not only fully emphasize the uncertainty of merge and acquisition activities and each enterprise'action, but also see through the macro strategic significances for each enterprise.This dissertation takes Tecent-NavInfo acquisition as a research subject, and employs case analysis method and theory and practice combination method. It illustrates that Navlnfo is a scarce market resource, and takes a strategic place for Tecent, by discussing the exclusive business mode, core competence and market barriers of NavInfo, as well as Tecent's SWOT and development strategies, so that all the factors contributing to Tecent-NavInfo acquisition come out. Then it points out that the total market value of NavInfo is made up of three parts: shares value, expansion option value and strategic value. Among them, shares value and expansion option value are valuated by Black-Scholes model which is briefly introduced, and strategic value is estimated by exclusive option game theory. Compared with the calculated total market value of Navlnfo, Tecent's payment seems to be appropriate. In the end, it summarizes the inspirations of Tecent-Navlnfo acquisition, gives some advices on following development planning of both enterprises, and reminds investors of that they should notice the disadvantages and exsiting problems of real option method, when they apply this method for enterprise valuation and guiding for investment decisions.