Research On The Value Evaluation Of The Target Enterprise Before And After Merger And Acquisition

After the government issued documents which are on the promotion of the merger and reorganization of the central enterprises in 2016,the Chinese M&A market has not decreased,the volume of transactions and the number of transactions has reached a new high level.Enterprises' merger and acquisition is a multi-step process,and the enterprise value evaluation is a key step in M&A.The evaluation results of the target enterprise is the basis of the negotiation,also the value of the target enterprise is the key to the success of the merger.At present,people widely use basic enterprise value assessment method(DCF model method,market method and cost method)to assess the target enterprise value,though the value evaluation system has been widely recognized,its existing disadvantages cannot be ignored.The basic enterprise value evaluation results only obtains the static value of the target enterprise,but the merger and acquisition is a dynamic decision-making process,static value can't reflect this dynamic process.On this basis,this paper build models on the basic evaluation methods,in full consideration of mergers and acquisitions' dynamic characteristics,in order to get the comprehensive and accurate target enterprise value.Therefore,based on the basic value assessment method of enterprises,this paper focuses on the changes of the financial leverage ratio of the target enterprises before and after the merger,and takes this as the starting point,gradually obtains the changes of relevant parameters in the model,and finally obtains the change value of the enterprise value caused by the change of the financial leverage of the underlying enterprise.The innovation of the article lies on the target enterprise value assessment giving full consideration on the characteristics of enterprise merger and acquisition,that may conclude the real option value,control premium value,and so on.Based on the basic model of parameter adjustment,we want to reap the reasonable value of target enterprise.In the evaluation of the underlying enterprise,the paper mainly considers the value changes caused by change of the financial leverage of the underlying enterprise before and after the merger,also we build the relationships between the financial leverage and the enterprise value of the underlying enterprise.Finally,we can summarize the following conclusions:1.The additional value is exiting,and it can have a positive effect on the value of the underlying enterprise's value;2.The merger and acquisition activity can lead to a larger financial leverage variation to the target enterprise,and acquirers' financial leverage is less affected by the M&A;3.The impact of corporate merger and acquisition activity on the the target enterprise's systemic risk is uncertain,the M&A activity does not necessarily reduce the systemic risk of the target enterprise;4.The results of the improved model are more closely related to the real value of the underlying enterprise,so the improved model results are effective.So in the process of mergers and acquisitions,in order to evaluate the value of the target enterprise,we should not ignore the values that mergers and acquisitions may have produced.Only fully considering all reasonable factors in the evaluation of the enterprise value,that can we get the more accurate target value.