A Case Study On The Merger And Acquisition Of Internet Companies By Traditional Companies Based On Real Options

Merger and acquisition is one of the important means of enterprise development,especially in the current period of China’s economic transformation,many enterprises are seeking to achieve business transformation and new growth through mergers and acquisitions of excellent companies.As one of the fastest growing and most influential industries in recent years,the Internet industry has attracted many traditional industry companies to enter the Internet field through mergers and acquisitions.Among them is Songcheng Performing Arts Company,which used to focus on tourism and scenic spot development.In 2015,the company acquired Beijing Liujianfang Technology Co.,Ltd.,an Internet Performing Arts Platform Company,in an attempt to seek new profit growth points and build a broader entertainment industry based on performing arts through the integration of online and offline resources.However,for Internet companies like six rooms,their growth is high,risk is high and uncertainty is great.Therefore,the traditional discounted cash flow method is not suitable for the valuation of such companies.This paper uses Schwartz-Moon real option pricing model,combines the financial data of Songcheng Performing Arts,Beijing Six Rooms and related industry companies in capital market,and uses Monte Carlo simulation to solve the problem.Finally,the overall value of the Six Rooms Company based on this method is about 3.2 billion yuan.This result has a certain gap with the valuation of 2.61 billion yuan based on discounted cash flow method and the actual price of 2.6 billion yuan for the acquisition of six roomsby Songcheng Performing Arts.Considering the actual performance after the acquisition,the discounted cash flow method obviously underestimates the performance of six rooms after the acquisition,ignores the synergistic effect of the acquisition of two companies,and ignores the six rooms as an online platform.The implied option value.The valuation of 3.2 billion yuan is close to the value of 3.4billion yuan announced by Songcheng Performing Arts in Beijing in 2008,which shows that the result of this paper is more reasonable.Therefore,this thesis considers that Schwartz-Moon real option pricing model is suitable for the valuation of Internet enterprises in their growing period.