The Application Of Equity DCF-Real Options In The Assessment Of Enterprises Overseas M&A Commercial Bank's Value

In recent years, merger and acquisition(M&A) in commercial banks industry overseas has been vigorously launched by Chinese enterprises, and many large scale state owned commercial banks are the leading participants in this field. Meanwhile, M&A subjects are developing towards polarization due to the participation of some international industrial group companies,such as Fosun Group, Yuexiu Group,etc.. The key for the success to obtain the overseas M&A commercial bank is to assess the value of the target bank. How to assess the value of the M&A target bank and brought increased revenue and try to pay the premium as low as possible are the things shall be fully considered by the acquiring firm.In the paper, the value of overseas M&A commercial bank in the firm in our country includes two aspects. Firstly is the bank's intrinsic value, and secondly is the M&A additional value. The former mainly reflects the current equity value of the bank, which can be estimated with the cost method, market method and income present value method. However, through the analysis of the feature of commercial bank and the particularity of the commercial bank M&A valuation, the paper holds that equity DCF is the most suitable method to assess the intrinsic value of the commercial value. The latter reflects the additional value-added benefits brought by the M&A activity for the acquiring firm, including the profit selected at the M&A time point and the expansion benefit produced by the subsequent strategic cooperation. The parts have strong flexibility and uncertainty, and it needs to be assessed by the real options. Therefore, the paper holds that equity DCF- real options is the most suitable method to assess the M&A value for the overseas commercial bank. In order to prove the applicability of the method, the paper applies the method in the case that Yuexiu Group tender offers Chong Hing Bank. Through the method, Chong Hing Bank's M&A value is assessed. Meanwhile, it compares with the actual transaction price to prove the feasibility. The paper hopes to provide a reference on the valuation decision-making for the acquiring firm and other market investors through the application of equity DCF- real options in the assessment of overseas M&A commercial bank's value.