Research On The Application Of Market-based Method In The M&A Valuation Of The Pharmaceutical And Biological Industry

Favorable national policies and intensified competitive environment are driving the pharmaceutical biotechnology industry to expand through the capital market.The accelerated industry concentration is reflected in the boom in mergers and acquisitions(M&As),in which the valuation results provide an important basis for pricing.Hence,due attention is deserved in regard to the ways to choose a reasonable valuation method.Over the past few years,China's capital market has been growing and improving,especially in the pharmaceutical biotechnology industry.As more and more companies go public,the prerequisites are gradually in place for the application of the market-based method.Among the three major methods of corporate value evaluation,the market-based method is advantageous in terms of operational simplicity and ease of understanding.However,it is not widely adopted in the M&A valuation of the pharmaceutical bio-industry.This paper believes that such a situation is tightly connected with the single choice of value multipliers and the judgment subjectivity of the market-based method.So it is key to find ways to choose rational value multipliers to broaden the adoption of the market-based method.To overcome the shortcomings of value multiplier selection of the market-based method,the paper takes account of the industry characteristics and discusses value drivers from multiple perspectives to address the problem of single choice of value multipliers.Meanwhile,the paper introduces the principal component analysis method in weighting the selected value multipliers,and applies statistical approaches to improve the objectivity of value multiplier selection.By building an integrated value multiplier model applicable to the pharmaceutical industry,the paper has revalued the transaction value of the trading case of Sinopharm Group's acquisition of Sinopharm Group Beijing.The valuation result is reasonable and has more reference value than the asset-based method in the case.In so doing,the paper verifies the validity and applicability of the model with a view to promoting the adoption of the market-based method and providing a reference for the valuation of M&As in the pharmaceutical biotechnology industry.