Evaluating Target Company On Case Of TNT Acquired By UPS

Merger and acquisition is an important way for companies to expand their business. And80%of failures are related to valuation. Currently, there have been many theoretical studies in merger and acquisition valuation, mainly consisting of absolute valuation method and relative valuation method. Moreover, the twelfth five-year plan in China has proposed to develop a few internationally competitive companies in the express industry, pushing the approaching of a wave of merger and acquisition in this sector. However, current studies are relatively rare specializing in the express industry. This thesis will firstly introduce and analyze the characters of absolute valuation method and relative valuation method. Following this, it will study the case of TNT acquired by UPS combined with the features of express industry. Lastly, it will give suggestion on the coming wave of merger and acquisition in China.According to the past financial data of TNT and UPS, this thesis will resort to relative valuation method of P/B ratio and absolute valuation method of discounted free cash flow to assess the intrinsic value of TNT respectively. The final results are€5.19billion and€5.55billion separately for the above two methods, which are very close to the former price of€5.16billion published in March2012. From the above, this thesis discusses the advantages and disadvantages of relative valuation method and absolute valuation method, taking the features of express industry into consideration. Compared to P/B ratio, the price obtained from discounted free cash flow valuation method is less close to the price published. The possible reasons may be as follows. On one hand, the transaction price is a result of long term negotiation based on valuation which will differ from the actual intrinsic value. On the other hand, it is difficult to obtain the financial figures of express business of TNT. So this thesis is referencing to its consolidated financial statements. Finally, it provides suggestions to merger and acquisition valuation in the express industry of China.