The Application Research Of Real Option Valuation Method In The Merger And Reorganization Of Cultural Enterprises

Based on real option theory,guided by promotion of real option method application through laws,regulations and standards,and combined with cultural enterprise's M&A boom in recent years,this article explores real option method's application in valuation of enterprises especially in cultural enterprises' M&A activity.The goal is to promote the perfection of laws,regulations and valuation standards,and the widespread use of real option method.Real option method is suitable for the physical investment valuation with high elasticity of the management decision-making or great uncertainty.The cultural enterprise's profits mainly come from intangible assets including copyright,trademarks,business qualification,and those intangible assets decide not only its high return,but also unstable and uncertainty of its return.Besides,cultural enterprises are also exposed to policy control and change risks,as well as intellectual property infringement,business model replication and replacement,severe competitive situation,capital chain breaks and other market risks,and the subjective preference change of consumers has increased the uncertainty of return.When the cultural enterprises are in M&A activity,because there is greater flexibility of management,the uncertainty and decision-making elasticity value is bigger,but the factors influencing value are not fully considered when using cost method and income method.The market method is also flawed when the market efficiency is not high and when the comparable transactions are difficult to find.Therefore,this article combines the real option method and the valuation in M&A activities of cultural enterprises through empirical studies of cases,and concludes that the real option value of cultural enterprises in M&A make up an important proportion of total value,and should be fully considered and reasonably evaluated in practice.At the same time,valuation should return to rationale,and various methods should complement each other.Although real option method can match the characteristics of the cultural enterprises in the M&A activity theoretically and logically,give a more reasonable measure,and make up for the lack of traditional methods,due to abstraction of real option concept and complexion of pricing model,application of the method needs to be based on traditional valuation methods.Meanwhile,due to the lag of valuation industry development and the law environment factors,this method has not been widely used.Therefore,this paper puts forward the proposal of perfecting law and standards as the system foundation,training and popularizing real option method in practice to ensure its proper and wide use.That would rationalize the valuation results,better safeguard the interests of all parties in the transaction,promote building consensus between both sides and promote a more fair and effective market order.However,fully promotion and application of real option method needs to keep moving forward in practice.