Research On The M&A Valuation On Hefei Sanyo By Whirlpool

With the development of economic globalization, inter-regional capital flows frequent which makes M&A and restricting activities among enterprises become active. As an important means to achieve the effective integration of resources and complementary advantages, M&A provides a shortcut for enterprises to complete expansion and growth. However, the M&A is a kind of complicated economic behavior which involves many problems and relations, M&A pricing, as the most sensitive issue, which is the participants most care about among them, only the reasonable pricing can meet the requirements of the two sides in M&A transactions. Valuation of the target company, as a basis for M&A pricing, is the most important which the both sides should to be resolved. In practice, valuation methods common used are assumed that the enterprise is in static environment, this is serious different with the investment hypothesis in real economy, so the valuation results tend to ignore the management flexibility and uncertainty, which leads to underestimate the value of the enterprise. In fact, operating flexibility and uncertainty is the option which is the company owned. The theory of real options is useful for the evaluation of the management flexibility and uncertainty, which can make up the lack of traditional valuation methods in a certain extent, the introduction of the valuation model based on real options theory has a great significance and plays an important role in revealing the value of target enterprise.This paper is in light of the following train of thought: raising the question — analyzing of the M&A theories — model construction — calculation and evaluation of M&A valuation — putting forward the conclusions and recommendations. This paper uses induction, classification, modeling, analytic hierarchy process, comparative analysis and other methods, and with the help of the real option theories to analyze the M&A valuation on Hefei Sanyo by Whirlpool.The main contents and conclusions of each chapter of this paper are as follows:Chapter 1 is introduction. It describes the research background and value of the topic, domestic and foreign research status, research train of thought and methods, the main contents and structure organization.Chapter 2 is overview of relevant theories of M&A valuation. This part is mainly divided into two aspects: traditional theories of M&A valuation and the real option theories, including classification, characteristics, applicability and limitations of the traditional theories of M&A valuation, as well as the connotation, types and characteristics and others of real options. Through this part of the paper, which lays the theoretical foundation of M&A valuation on Hefei Sanyo by Whirlpool.Chapter 3 introduces the basic situation and pricing analysis of Hefei Sanyo which acquired by Whirlpool. This part mainly includes the background of M$A, the basic situation of Whirlpool and Hefei Sanyo, M&A process, M&A pricing basis, and M&A pricing problems and other contents.Chapter 4 is the application of real options on M&A valuation on Hefei Sanyo by Whirlpool. This part mainly includes the necessity and feasibility of introducing real options to analyze the M&A valuation, basic assumptions and how to build the real options model, calculation of the valuation of the target enterprise with the real options model. The study found: Hefei Sanyo has a lot of real options in the M&A transaction.Chapter 5 is the results and evaluation of M&A valuation on Hefei Sanyo by Whirlpool. This part mainly includes the use of analytic hierarchy process to determine the partition coefficient, the valuation of Hefei Sanyo, the comparison and evaluation of the results and other contents. The result of the study show that: the use of real options model can reveal the intrinsic value of Hefei Sanyo more accurately.Chapter 6 is the conclusion and recommendations. First, to sum up the main conclusions of this paper; Second, putting forward some recommendations about how to use real option to calculate the value of target enterprises in M&A practice.The research shows that the overall value of Hefei Sanyo contains a great lot of options value, the real options model can reveal the value of Hefei Sanyo more accurately, the results are more in line with corporate performance in the stock market.