Business valuation in mergers and acquisitions harvard business. The purpose of the course is to give the user a solid understanding of how mergers and acquisitions. According to creswell 20, there are three kinds of research methods. Value the target with the acquisition motive built in. Acquisition valuation involves the use of multiple analyses to determine a range of possible prices to pay for an acquisition candidate. This may help establish a floor with respect to value for negotiating purposes. Need for valuing shares or businessas far as unlisted companies are concerned the price of shares of such company is notreadily available, so we need to determine the value. She has held academic positions at thunderbird, school of global management in the u. An acquisition occurs when one company proposes to offer cash or its shares to acquire another company. Choose the accounting method for the merger acquisition. Examining the value of a target on a stand alone basis can be valuable for several reasons. Evans, cpa, cma, cfm part 2 of this course continues with an overview of the merger and acquisition process, including the valuation process, post merger integration and antitakeover defenses. It builds on standard methods of business valuation to consider the unique questions arising in a merger or acquisition setting.
Determine the value of target companies as well as post merger. Valuation methods posted on november 18, 2016 july 23, 2017 by john kennedy generally, when valuing a company, there are two different ways to approach the valuation of the company. Mergers and acquisitions edinburgh business school. Mergers and acquisitions definition, types and examples. In all cases, both companies merge to form one company, subject to the approval of the shareholders of both companies. An introduction to valuation flotation and then as an acquisition target for ntl 8. The basics of mergers and acquisitions investopedia.
Below are the steps of how to build a merger model. Each proceeding involving a major transaction has a web page which contains links to the major documents filed in the proceeding. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure. Initially, it is necessary to distinguish the terms value and price. How to build a merger model a basic overview of the key. Evans, cpa, cma, cfm this course part 1 provides a concise overview of the merger and acquisition process, including the legal process, federal regulations and due diligence. Coates iv1 the core goal of corporate law and governance is to improve outcomes for. Chapter 4 mergers and acquisitions valuation finance. Value creation through mergers and acquisitions a study. Financial risk management 1 and financial risk management 2. Pdf investment banking valuation, leveraged buyouts.
Company valuation, merger and acquisition, discounted cash flow method. Price is the amount of money paid to obtain a good or service, and it may not necessarily reflect the value. The importance of mergers and acquisitions in todays. Assessing an acquisition s value by estimating its likely impact on earnings per share has always been flawed.
In addition, you can use the commissions electronic comment filing system ecfs to obtain all of the documents that have been filed with the commission. Financial statement analysis in mergers and acquisitions howard e. Most textbooks on mergers and ac quisitions concentrate on one aspect of the process, such as the financial aspect. Decide on the mode of payment cash or stock, and if cash, arrange for financing debt or equity. The only book to focus on valuation specifically for mergers and acquisitions, valuation.
The purpose of this course is to give the user a solid understanding of how mergers. Viswanathanb,1 acolumbia university, graduate school of business, new york, ny, 10025, usa bduke university, fuqua school of business, durham, nc, 27708, usa abstract to test recent theories suggesting that valuation errors a. Mergers and acquisitions have become common business tools, implemented by thousands of companies in world. The workshops are suitable for delegates from quoted companies, companies that are considering an acquisition. Methods of valuation for mergers and acquisitions hbr store. The template includes space for company logos, the deal. Available as word and pdf files, this template provides an outline for formally announcing news of a merger or acquisition. Undoubtedly today we live in a time of significant economic change. The importance of mergers and acquisitions in todays economy rima tamosiuniene1, egle duksaite2 abstract. First, it can provide a view of what the target firm is capable of achieving on its own.
The costs of debt and equity should be goingforward market rates of return. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Johnson, mba, ca, cma, cbv, cpa, cfa campbell valuation partners limited overview financial statement analysis is fundamental to a corporate acquirers assessment of an acquisition or merger. Valuation for mergers and acquisitions ooikokhwa mrr consulting. Mergers differ slightly from acquisitions in that mergers. Aswath damodaran 3 steps involved in an acquisition valuation n step 1. The chapters that follow consider a variety of valuation methods. This text attempts to consider the whole process, from strategic rationale to implementation. Most mergers and acquisitions are directed at acquiring the equity of the target company. Types, regulation, and patterns of practice john c. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. There are many ways to value a business, which can yield widely varying results, depending upon the basis of each valuation.
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