The Application Of The Real Options In The Valuation For M&A In The Information Technology Industry

Along with the development of economic globalization,mergers and acquisitions have become more and more frequent.Mergers and acquisitions are important ways to integrate enterprise resource and develop a new business.One of the core issues of M&A is the valuation of the target company.Not accurate estimate will lead to the acquirer make the wrong decisions and lose valuable investment opportunities,which will directly result in a failure of the M&A activity.Information technology industries have their own industrial characteristics,including the technology pilot,the rapid change of the market,and the fierce competition,making the M&A activities in the information technology industry have significant investment characteristics and option features.However,most of the traditional enterprise valuation methods have a shortage of flexibility,not considering the uncertainty factors in the process of mergers and acquisitions,and ignoring the option value of the target company.Real option is a good way to make up the defects of the traditional valuation methods.It provides a thinking model to grasp the investment opportunities,face up to the risk and revaluate the target company.In this paper,through the research of theories of the M&A and real options,combining the characteristics of the information technology industry and the M&A in this field,I further discussed the application of the real option theories in the valuation for M&A in the information technology industry.On the basis of theoretical analysis,this paper mainly used the method of case analysis.In the case of the JiXing Tower acquisitions,the real option methods were applied to the valuation of the target company,Beixun Telecommunications.The end of the article also pointed out that this method’s possible problems in the process of practical application and the shortage of this paper.