Application Of EVA Valuation Model In Monarch Sanitary Ware Acquired The Oceano Ceramics

From the 21 st century,due to the effect of economic globalization,the competition that Chinese enterprises faces is becoming increasingly fierce.Under this circumstance,in order to achieve scale effect and optimize resource allocation,enterprise mergers and acquisitions(M&A)are becoming more and more popular among Chinese enterprises.Although the number of M&A is increasing,the success rate of M&A is not high.Throughout the typical case of successful M&A in the world,successful cases can not be separated from reasonable M&A prices.Therefore,how to accurately evaluate the value of enterprises and play a guiding role in decision-making for business operators and investors,which has become the key to the success of M&A.At the same time,under the current investment background with "value investment",for the objective and rational market participants,the M&A price must focus on the potential value of the target enterprise in the future.Using appropriate and effective valuation methods,we can make a real and scientific research on the overall value of the enterprises,so as to discover the true value of the target enterprise in the current market.Therefore,in order to determine the value of the acquired company reasonably and accurately,it is necessary that have a complete and effective enterprise valuation method and model.Among the existing enterprise value assessment models,the most widely used valuation models are free cash flow valuation models and relative value valuation models,and the EVA valuation model is relatively less used.However,the EVA valuation model is a new value assessment model formed by the combination of EVA indicators and traditional evaluation methods.It makes up for the shortcomings of traditional assessment methods,which pay too much attention to the single perspective and short-term benefits,embodies the concept of comprehensive value evaluation and sustainable development,and more accords with the requirements of modern society for value evaluation.In the case of this paper,as the first enterprise listed on the new third board in Foshan city,the target company,Oceano ceramics,is famous for its strong independent innovation ability in product and business model both inside and outside China's construction ceramics industry.In order to assess the true value of the target company,using the EVA valuation model is not only beneficial to the decisionmarking of M&A,but also can improve the target company valuation system in the M&A.The research ideas of this paper are as follows.Firstly,after understanding the relevant theories of enterprise value assessment,this paper studies and analyzes the literature review of major enterprise valuation methods.It is considered that the existing valuation methods are mainly based on "accounting profits" rather than "economic profits" to evaluate the enterprise value,so it is difficult to evaluate the enterprise value in a comprehensive and balanced manner.While the EVA valuation model focuses on the sustainable development of enterprises,through adjusting the relevant accounting subjects and taking into account the cost of equity capital,it can more fully reflect the real value of enterprises than the existing valuation methods.Based on the above comparative analysis,this paper believes that the EVA valuation model has good applicability in the evaluation of enterprise value in M&A.Secondly,in order to improve the accuracy of the EVA valuation model,this paper analyzes the source of enterprise value in the M&A,and believes that the value of enterprises in M&A mainly comes from the intrinsic value of the target enterprises and the synergetic value generated by the M&A.Based on the above analysis,this paper introduces the synergetic value of enterprises based on EVA,defines the relevant parameters and accounting adjustment according to the value concept of EVA,and establishes the valuation model of the target companies based on EVA.Thirdly,this paper combines the actual case of Emperor Sanitary Ware merger with Oceano ceramics,mainly introduces the basic business conditions,major financial data and the merger process of both sides in the M&A case,and specifically analyses the motivation of Emperor Sanitary Ware merger with Oceano ceramics.Then,using the method of normative research and case analysis,this paper references with Oceano ceramics audit report September 30,2016,and forecasts the related valuation factors and the intrinsic value of Oceano ceramics.At the same time,this paper analyses the synergetic value and EVA value brought by synergetic value after M&A,and evaluates the enterprise value of Oceano ceramics.Finally,this paper compares the valuation results with the merger consideration of Emperor Sanitary Ware,and concludes that the valuation results basically coincide with the merger consideration,which further illustrates the effectiveness of the EVA valuation model.In summary,this paper combines theory and practice of the current enterprise value evaluation.It analyses the related characteristics of EVA valuation model and the enterprise value in M&A,and constructs the corresponding EVA valuation model.Subsequently,through the application of EVA valuation model in actual M&A cases,this paper further illustrates the effectiveness of the EVA valuation model.Finally,this paper puts forward some problems that should be paid attention to when applying EVA valuation model to the valuation of target companies in M&A,which provides some reference for the application of EVA valuation model in actual M&A business.