A Comparative Study Of The Value Evaluation Income Method And Real Option Method Of Target Enterprise In Mergers And Acquisitions

Nowadays,under the background of economic globalization,the competition among enterprise has become more and more fierce,and corporate mergers and acquisitions have become a shortcut for enterprises to expand their scale of operation and enhance their competitiveness.Currently,M&A transactions are very active globally,with a high number of transactions and transaction amounts.Many enterprises have achieved great success through mergers and acquisitions,but at the same time,some enterprises have not achieved their own expectations.Instead,they have been mired in M&A activities.The reasons for the failures come from various aspects.One important point is that there is no target in the M&A valuation.The enterprise gives a scientific,accurate and reasonable value assessment.The precondition for the M&A transaction is that the target enterprise has a more reasonable evaluation value accepted by both parties to the transaction,which can reduce the risk in the M&A to a certain extent.This paper mainly discusses the choice of the two evaluation methods of the target enterprise valuation link in the M&A transaction,and puts the income method and the real option method under the background of the evaluation of the M&A transaction.Firstly,this paper introduces the concept,types and motivation of M&A from a multi-angle perspectives,and then elaborates related theories such as investment value theory,value creation theory and transaction cost theory.Finally,a case is introduced,which uses two methods to evaluate.Through a complete evaluation and calculation process,the differences between the two methods are shown.The results of the two methods are compared,and the application conditions of real option method and income method in evaluating target enterprises in M&A are analyzed.For the target enterprise,it can clearly understand its own value level to determine the lowest price that can be accepted in the M&A negotiation,and protect the shareholders' rights and interests.However,for M&A enterprises,fully understanding the market value of the target enterprise before the merger can help the M&A firm to determine the highest quotation acceptable in the M&A offer,providinga reliable reference and theoretical basis for M&A activities.In summary,a reasonable valuation of the target enterprise is a prerequisite for M&A transactions and,to a certain extent,reduces the risk in M&A.