Research On Valuation Of Cross-border Merger And Acquisition In Emerging Countries

A substantial fraction of the growth in FD1 during the late 1990s can be attributed to the rapid increase of cross-border mergers and acquisitions rather than green-field investment. According to its complicated risks, valuation is vital to the success of the investment. However, there are more challenges to valuation in emerging countries, where cross-border mergers and acquisitions take place more and more often. So the improvement of valuation techniques has gained much importance in these countries.Firstly, on the analysis of the motive of cross-border investment, we divide the value of the companies into two parts, the real value and strategic value. The strategic value comes from the market advantage, technical advantage and resource advantage. Besides, country risk, the special risk of cross-border acquisition should be counted into the value.Secondly, inefficiency of the stock market, poor corporate governance and high country risk are the main characteristics of the valuation environment of the emerging countries. According the uncertainty and high risk, we introduce the grey theory and create the multi-hierarchy grey valuation model, which is based on analytical hierarchy process. According to the model, 27 indexes, both financial and un-financial, can be used to evaluate the real and strategic value of the company.Eventually, a case of foreign acquisition in China is analyzed to demonstrate the use of the model.