The Pricing Of Cross-Border M&A Based On Real Option

In recent years,with the development of the domestic economy and the rapid growth of enterprises,mergers and acquisitions have become an important way for enterprises to rapidly expand and improve their own development.Coupled with the rapid development of economic globalization,more powerful enterprises choose cross-border mergers and acquisitions to achieve cross-regional and cross-country development.Cross-border mergers and acquisitions can enhance the competitiveness of enterprises and promote the development of China's economy.In mergers and acquisitions,the most concerned issue for both parties is the M&A price.Therefore,whether the value of the M&A enterprise can be objectively and accurately evaluated is the key to the smooth development of M&A activities.The method of traditionally value evaluation of mergers and acquisitions is more used in enterprise value assessment,including cost method,market method and income method.Although these three valuation methods have long application experience,cross-border M&A behavior has multiple uncertainties,which may be accompanied by high investment risks and may also bring new investment opportunities to M&A companies.The traditional enterprise value assessment method does not fully consider the uncertainty value contained in the M&A process.In the process of enterprise development after mergers and acquisitions,decision makers can change their business strategy according to the changes of market environment and the uncertainty of the project.This flexibility of operation can be understood as a kind of real option held by the decision maker.Therefore,it is necessary to evaluate the value of real options into the overall value of the enterprises.This will make the assessment of the enterprise value in the merger more accurate and reasonable.By introducing the real option method,this text regards the real option contained in the M&A process as a composite real option,and combines it with the traditional enterprise value evaluation method to make up for the shortcomings of the traditional enterprise value evaluation method.It can objectively and truthfully assess the value of the business.This paper firstly expounded the content of four enterprise value assessment methods,summarized the shortcomings of traditional enterprise value assessment methods,the advantages of real option method in cross-border M&A pricing,and analyzed the impact of exchange rate on cross-border M&A pricing.Secondly,by introducing the concept of real options and sorting out the types and characteristics of real options,the real options existing in cross-border M&A activities are analyzed.Further,under the framework of real option method,the composition of cross-border M&A value is analyzed,and a composite real option pricing model is established for its option value.In order to make the pricing model more in line with the characteristics of cross-border M&A,this paper established a composite real option pricing model considering exchange rate,and introduced the model principle and calculation steps.Finally,it introduced the basic situation of Midea Group's acquisition of KUKA Group.Used the cash flow discount method and the least squares Monte Carlo simulation method to estimate the actual asset value and composite real option value of KUKA Group.It can test the application effect of real option pricing method in real cases.This has certain reference significance for the evaluation of the value of enterprises in cross-border M&A and the determination of transaction prices.Our innovations points are as follows:(1)By analyzing the real options under different decision-making environments in the stage of cross-border M&A integration,we conbine single option into a compound real option,and propose the value of M&A enterprise is composed of the real asset value and the compound real option value.(2)We introduce the exchange rate that affects the pricing of cross-border M&A into the compound real option pricing model,which makes the pricing model more in line with the characteristics of cross-border M&A.