A Case Study On The Mergers And Acquisitions Of Zhejiang Financial Network Technology And Hundsun Technology

In recent years, China's economy bid farewell to the triumph, into a new orbit of transformation and upgrading. In order to promote and implement the national "going out" strategy, the State Council promulgated favorable policies to promote mergers and acquisitions. Thanks to dividends of reform and support of acquisitions policy, our M&A market presented an increase by leaps and bounds in 2014. In the process of M&A, the core issue is to evaluate the valuation of the target company's underlying assets. Traditional methods of evaluating the assets value of the target enterprises M&A include costing method, market method, income method and economic value added method. For Computer software enterprises, the traditional valuation methods do not take the uncertainty value into account in the process of enterprise M&A. However, the application of real option theory can make up for the deficiency of the traditional valuation methods for the uncertain situation.On the basis of systematically introduction of the real option model, this paper applies the real option method to the M&A case of the Zhejiang Financial Network Technology and Hundsun Technologies. During the evaluation process, first, use predicted cash flows and discount rate to calculate the present value of enterprise assets; then determine the value of underlying asset, strike price, volatility, option expiration date, risk-free rate to calculate the value of the options; then add them to obtain the overall valuation of the enterprise; besides, compare it with the actual purchase price to judge the validity of the model; then compare the change of financial indicators before and after the mergers and acquisitions to evaluate the result of M&A; Finally, by pointing out the existent problems of real options evaluation, this paper actively improve and explore the broader scope of the method in the future.