Research On The Pricing Method Of Stock Exchange Absorption Merger

With the opening of China's market economy,mergers and acquisitions among enterprises have become commonplace.Acquiring firms begin to present diversified motives,such as seeking control rights,enhancing synergism or integrating industrial chains,and so on.Correspondingly,the means of payment are becoming more and more diversified.Equity and some financial instruments become the methods of paying consideration.These methods can make enterprises more flexible to solve practical problems.And the method of acquisition by exchange of stock gradually entered into the field of view.The adoption of stock exchange absorption can effectively save the transaction costs and reduce the liquidity pressure of enterprises.Based on this background,it is necessary for us to study the issues related to the merger by exchange of stock.In the scheme of stock exchanging merger,whether small and medium-sized investors or management,the most concern is the share conversion ratio,cash options and other pricing methods.The choice of different ways will show different value effects.It will also affect the investment interests of different groups.The development of stock exchanging merger in China has gone through three stages including the period of share splitting,the period of split share structure reform and the period of full circulation.By summing up the cases of stock exchange and merger during the period of share splitting and full circulation in China,it is found that the choice of different pricing modes in different periods is different.During the share splitting period,due to the existence of non-tradable shares and tradable shares,enterprises were usually presented as "one-share dominant" business model,and management tended to pay attention to index such as net assets per share.Therefore,in the process of stock conversion and merger,more and more net assets per share based on book value and earnings per share are chosen as the representative calculation method of share conversion ratio.In the full circulation period,almost all companies would use the market value-based per-share method as the basis of calculation.There is no difference between right and wrong in the theoretical basis of pricing.In the practical application,enterprises will consider their own situation,market environment and so on,to choose pricing methods according to all kinds of factors.By observing the case of stock exchange and absorption merger in China,we find that when enterprises use the pricing method based on book value,such as net assets per share method,the additive coefficient is very subjective.As a result,major shareholders can use this loophole for self-interest transmission,and the final price is unreasonable or unfair.When enterprises use the price method of each stock market,based on the special nature of the stock market itself,they can restrain the bad motivation of management to a certain extent,and the final price can be relatively reasonable and fair.Although there are a lot of literatures related to mergers and acquisitions,the research on the method of stock exchange absorption and the method of merger pricing in stock exchange merger still need to be continued.For this reason,this paper firstly summarizes and sorts out the relevant literature on the share-for-share absorption merger pricing method and value creation,and then analyzes the sharefor-share merger pricing method,including the way that enterprises determine the share-for-share ratio and cash option.Through literature review and theoretical analysis,it is found that the basis of stock exchange merger pricing is to determine the enterprise value.At present,there are many ways to evaluate the value in China,and the selection of an applicable pricing basis is the first step for the success of stock exchange merger.Then,based on recent years all share swap absorption merger case summary,statistics and concludes the change trend of pricing methods found in China due to historical reasons,the case of equity division period basic using addition method to determine convertible ratio,net assets per share basic market price per share method is used to full circulation period,trends change description method used in our country stock market effectiveness in increase slowly,companies and investors more market value.Finally,on the basis of the above theoretical framework,a comparative analysis of the two cases is carried out,that is,xincheng holdings' share swap absorption of jiangsu xincheng and the first department store's share swap absorption of hualian commercial building.Through the analysis of different pricing methods selected based on different value bases in the case,the theoretical basis is derived from the practice in turn,to judge whether the actual situation conforms to the theoretical expectation,whether the pricing method is reasonable,and to analyze whether the stock exchange merger has an impact on the enterprise value effect.