The Research Of Real Option Evaluating Method In M&A

With the development of the market economy and the global economy, the market competition has become more and more intense. Through the Merger and Acquisition a company (M&A), a company can acquire the large-scale production and reduce the business risk. In the other hand, M&A can promote the adjustment of the industrial structure, optimize resource distribution of the society, and improve the competitive of the economic. The key process of M&A is the valuation of the target company. A key factor to an M&A case is a reasonable price. Therefore, it's necessary to study the theory and practice of valuation of the target company in M&A.The traditional theories of the target company assessment in M&A neglect the value of option, so that the value of a company is underestimated. This paper mostly analyses the option characteristics in M&A and sets up the Real Option Evaluating Model. With the Real Option idea, we can distinguish the option characteristics in M&A and evaluate it. According to the analysis of the Discounted Cash Flow method, this paper studies how to apply the real option in the valuation of the target company in M&A and sets up a model by combining the Discounted Cash Flow method and the Real Option Evaluating Model. Meanwhile, it studies a case (the First Automobile Works Group Corporation merged the Tjxiali Automobile Company) and looks forward to being helpful to practice of merger valuation.Black...