Research On Cross-Border M&A Decision Based On Real Option Game

Cross-border M&A is a product of economic globalization and has gradually become an important strategic way for enterprises to expand their business and enhance their international competitiveness.Since cross-border M&A is a systematic project with many links and various problems emerge one after another.The current research on cross-border M&A mainly focuses on M&A decisions,financial risks,cultural integration and M&A performance.Among them,cross-border M&A decision-making is the key to determining the success of M&A.Therefore,it is particularly important to determine the M&A price and the optimal timing reasonably.In view of the fact that traditional M&A pricing and timing selection methods cannot satisfy the uncertainty and competitive of M&A,and do not consider the real option characteristics of M&A process,this paper uses the option game method to study the problem of cross-border M&A pricing and optimal timing selection.This paper mainly focuses on three aspects: firstly,it theoretically analyzes the factors that influence the valuation of enterprises.The analysis finds that international factors have a certain impact on the valuation of enterprises.Among them,exchange rate fluctuations will lose the value of enterprises.Both tax rate and inflation rate will influence the valuation of M&A by affecting the estimation of discount rate and cash flow.The political risk and institutional distance are due to differences in national regulations and systems bring risks of corporate value loss.Second,analyze the M&A decision-making problem by establishing model.Based on the uncertain process,the real option method is used to construct the valuation model.In order to consider international factors,the exchange rate and institutional distance function are introduced into the model.After completing the static valuation modeling of cross-border M&A,in order to determine the final M&A price,this paper establishes a dynamic negotiation model of incomplete information under two different bidding methods,respectively,and obtains the sub-game refined Nash equilibrium solution.It was found that different bidding methods and negotiation times would affect the final price of M&A.In addition,the option game method is used to establish the M&A timing selection model with no competition,incomplete information and competition.The optimal M&A time is solved.And the results show that incomplete information and competition can advance the optimal timing of M&A.Finally,taking Wanda's acquisition of American AMC theater company as an example,using the model constructed in this paper to estimate the final acquisition price and the optimal acquisition timing,the results are not much different from reality,and the model is valid.Therefore,the research content of this paper can provide reference for cross-border M&A decisions.