Research On Modified Market Approach Of M&A Valuation Of A Pharmaceutical Company

Enterprise value appraised provide an important basis for M&Apricing,so that M&A valuation is the key problem toM&A pricing reasonable. Compared with the cost approach and the income approach, market approach has many advantages. It not only considers the enterprise mixed ability, also includes the M&A market supply and demand information, more fully reflecting the enterprise value in the valuation date. However, the market approachneeds more prerequisites, not only the effective capital market, and the active trading market information disclosure. With the continuous development of China’s capital market and the recent M&A activities increase, the application scope of the market approach will continue to expand. Specially, as a special industry of high risk, high technology, high marketing, pharmaceutical industry requires higher level of valuation. The application scope of market approach currently used in the pharmaceutical industry is limited, and it is related to the subjective judgment of the market approach. The value indication and similar assets are so important to valuation conclusion in market approach that it is key to use the indication and similar assets more objectively and scientifically.Based on this, it is necessary to conduct a study of the pharmaceutical industry M&A market approach and propose a market approach model for the pharmaceutical industry M&A. This paper propose a modified M&A market approach combined with the characteristics of pharmaceutical industry and industry risk in the case study about A medicine Limited by Share Ltd being merged by B medicine Limited by Share Ltd, focusing on the pharmaceutical industry M&A market approach indication and similar assets.Studies have shown that the modified market approach is effective to the valuation case and the valuation result is closer to bargain price. At the same time, the five sub sectors of the pharmaceutical industry, chemical medicine, traditional Chinese medicine, bio pharmaceutical, pharmaceutical business and medical services, present different operating features. Through the correlation of the five sub sectors value indication, we found that different value indication is suit for different pharmaceutical sub sectors. Appraisers should chose suitable indication considering enterprise and industry.At the same time, entropy evaluation method fuzzy mathematics method are effective for similar assets choosing and giving weight.