When determining the acquisition price of a target company, you mainly need to rely on the company’s financial data. All evaluation methods are based on the company's financial data, company performance and market performance, and the merger price is determined through negotiation between the two parties based on the evaluation results. Of course, some non-financial data factors, such as the type of mergers and acquisitions, the choice of transaction methods, etc., will have an impact on pricing, and in some cases will have a very large impact.
1. Purpose of merger and acquisition
If the acquirer’s purpose of merger and acquisition is only to obtain certain equipment of the target enterprise, but has no intention of continuing to operate the enterprise, and the financial information of the target enterprise detailed, then the book value method can be used. If the acquirer's purpose of conducting an M&A is to increase profits, and what the acquirer values ??is the future cash return of the target company, then the discounted cash flow method, which is the most close to the future operating cash flow in the estimation process, is applicable, and The actual operating data after the merger can also be used to test the estimated values ??in each period to make the evaluation system more optimized. If the acquirer's main purpose of conducting an M&A is to reduce the risk of the enterprise, the replacement cost method can take more into account market price factors and price cycle fluctuation factors as well as the value of tangible assets, so it can be used as the main evaluation method.
2. Industry maturity of the target company
Industry maturity determines the actual number of comparable listed companies with the same scale, same profitability, and same level of competitiveness in the market, and This is a prerequisite for value assessment using the price-to-earnings ratio comparison method. Only by finding sample companies that are quite close to the target company can the price-earnings ratio method fully reflect the market's rational evaluation of the target company.
3. Industry characteristics
The industry characteristics of the target enterprise are a very important criterion for selecting evaluation methods. Compared with traditional industries, emerging industries and industries with higher added value have greater risks, and physical assets usually account for a smaller proportion of corporate assets. Therefore, acquirers need to particularly consider the future growth and various intangible assets of companies in these industries. The role of assets in business development.
In these companies, intangible assets such as patents, copyrights, franchise rights, and goodwill usually bring huge economic benefits to the company after mergers and acquisitions. These potential assets cannot be obtained from general financial information. Opportunity value should be given special consideration in the evaluation. Generally speaking, the option pricing method and discount method can better solve the problem of underestimation of intangible assets.
4. Development prospects of the target enterprise
If the target enterprise as a whole has lost the ability to continue to add value or has no survival value, then the liquidation price method can be used; if the target enterprise Competition in the industry is very fierce. After the merger, a huge investment is required to maintain it. Therefore, the investor has no intention of continuing operations. The merger and acquisition has another purpose. For example, if the target company is located in a prime location, real estate development can be carried out after the merger. This The book value method can be used.
5. The professional level of the evaluators
Any successful corporate merger and acquisition not only comes from the efforts of both parties to the M&A transaction, but also the professional level of the evaluation agency and evaluators. important meaning.
6. Other uncontrollable factors
In addition to the above factors, the development pattern of the world economy, the development status of the country's macroeconomics, the perfection of the market economic system, and the perfection of laws and regulations , after-tax preferential policies and many other uncontrollable factors from outside the company will also affect the fluctuations of various parameters in the value assessment method. When evaluating enterprise value, the acquirer needs to consider the impact of these uncontrollable factors on the evaluation results, appropriately adjust the weight of each evaluation method in the evaluation system, and optimize and modify the evaluation system.
7. Value evaluation of high-tech enterprises
Here, high-tech enterprises specifically refer to innovative enterprises that have been established recently. These high-tech companies are generally small in scale, have low sales, and are often not yet profitable or even losing money. Due to their high growth and high risk, their valuation has become a more difficult task. Generally speaking, high-tech companies have a short history of establishment and operation. Many companies still have very little sales revenue or even no profit at the time of valuation. The business prospects of the companies are highly uncertain. They may develop abnormally in the future and become a hot multinational enterprise, or they may soon fail and fade out of the market.
Generally speaking, the asset size of these enterprises is not that important. Their most important assets are various intangible assets such as technology, patents, and technical know-how, as well as the skilled personnel attached to these intangible assets. The success of high-tech enterprise development mainly depends on the cost and timing of R&D, production and marketing of products or services. When evaluating the value of high-tech enterprises, we must not only look at the company's products, prices, quality, output, and costs, but also look at the timing, the company's competitive situation in the market, and the company's advantages. Some high-tech companies rely heavily on the access system stipulated by law. Without approval from relevant government departments, new products cannot be launched. Therefore, whether such enterprises have government authorization and corresponding license certificates directly affects the value of the enterprise.
When evaluating the value of high-tech companies, the focus is on: the company's capabilities and the ability to create new or improved products and services; the company's ability to maintain sustained competitive advantages and the company's cash flow ; Review the company's business plans and forecasts, check the company's costs of completing product production and improving product quality, and adjust its financial forecasts based on actual conditions; pay attention to the capabilities of key technical personnel and management personnel, determine whether they will be lost, and analyze the replacement of them Cost, study relevant confidentiality agreements and non-compete agreements; for companies with technology or patents, analyze the cost and time of mass production, which involves financing, reduction of factory buildings, purchase of equipment, recruitment of personnel, etc.; pay special attention The price level and sales capabilities that can make the company profitable, understand whether the relevant distribution channels are smooth; analyze the company's option incentive arrangements, and the impact of relevant arrangements on the value of the company.
The tangible assets of high-tech companies are often just a few computers and desks. Therefore, the adjusted income method and the market method are more suitable for their valuation, but the asset method is less suitable. In addition, because high-tech companies do not yet have much profit, the price-earnings ratio method does not apply to them. High-tech enterprises are also not suitable to use the single-period capitalization method, which is to determine an appropriate rate of return and calculate the enterprise value by calculating a perpetual annuity, because the enterprise's income is very unstable and may have a high-speed growth rate. With changes in the market and personnel, earnings may also drop sharply. In practice, the multi-period income discount model is often used for the valuation of innovative high-tech enterprises, which can adapt to situations where the enterprise's income growth rate has very large differences in different stages.