Evaluating The Value Of Equity Investment In Enterprise M&A

The development of capital market and the expansion of enterprises are inseparable from mergers and acquisitions.With the rapid development of China's economy,mergers and acquisitions of enterprises are becoming more frequent,and investment and mergers and acquisitions play an increasingly important role.Therefore,the evaluation of the value of the target enterprise has become an investment M&A activity.The most important part of the process.The value of investment M&A activities includes not only the market value of the target company,but also the value of the synergies brought by the merger.Therefore,it is necessary to select appropriate evaluation methods and value types to evaluate the investment merger.Most of the current domestic value assessments use market value types,only considering the market value of the target enterprises,ignoring the value of synergies in investment mergers and acquisitions,resulting in undervaluation of transaction prices,and difficulty in assessing the value of corporate investment mergers and acquisitions and the actual management of enterprises.The need also restricts the development of China's corporate investment M&A business,and it is difficult to play an important role in asset valuation as a reference for value.China's investment mergers and acquisitions regulatory authorities,especially the SASAC and the China Securities Regulatory Commission,have begun to actively promote the evaluation based on investment value.The China Asset Appraisal Association communicated with the relevant leaders of the State-owned Assets Supervision and Administration Commission of the State Council from May to July 2016 to decide on the drafting of investment value assessment.The guidelines,from October to December 2017,organized experts to review the “Guidance on Investment Value Assessment”(proposal draft),and the project team systematically researched and revised according to the evaluation opinions to form the draft for this consultation.Based on the theory of enterprise investment M&A and the theory of investment value evaluation,this paper discusses the value of investment and studies the quantity and logical relationship between investment value and market value,which indicates that the investment value is composed of market value and synergy value.Market value and synergy value should be considered in the assessment.For example,Gree Electric's equity investment in Wingtech is based on the previous theoretical research,using the economic value increase method to evaluate the market value,using the real option method to evaluate the synergy value,and comparing the evaluation results with the transaction price.It is reasonable to analyze the investment from both sides.When using the real option method to evaluate the synergy value,the synergy effect of the investment activity is first identified,and the competitive factors of the same industry are considered in combination with the investor's position in the industry.The principal component analysis method is used to calculate the competitive strength coefficient.The competitive strength coefficient corrects the synergy value in order to obtain a more reasonable synergy value.Finally,the sensitivity analysis of investment value and synergy value is carried out to explore the influence degree of each parameter change on the evaluation result,and provide suggestions for the key investors in the enterprise investment M&A activity.