M & A Pricing Analysis Based On Expected Utility Theory

It will be meaningful for the economic growth of China to study the rules of M&A and make a efficiency pricing methods. In order to systematically study the factors that affect the price in M&A, make a fair price and put forward the M&A in China, we construct a pricing method of target corporations based on expected utility theory.We make a analysis of the procedure in M&A, including: evaluation of target corporation,synergy in Mergers and bargaining model. Then we construct a bargaining model using expected utility theory, and analyses the affecting of risky attitude and bargaining power to the pricing in M&A and make a positive study of bargaining power of both sides with the data of company in 2006, concentrating on their managing ability and profiting ability. At last an example is made to illustrating the pricing method based on utility theory.We get three conclusions: Firstly, distinguishing the risky averse and bargaining power is a realistic choice to the pricing analysis; Secondly, bargaining power is critical factor in the M&A pricing; this model based on expected utility theory is a practical choice in the analyzing the bargaining power of both sides; Finally, the bargaining power is related to the liability rate of the host,the average ROE of the past three years,the ratio of the public shares to the national shares and the earnings per shares(EPS) of the target corporations.