Takeover (Merger)
In theory, merger analysis is simple. The acquiring firm carries out an analysis to value the target company. The acquiring firm then seeks to buy the firm at less than the estimated value if possible. However, the target company would only accept the firm’s offer if the offer price exceeds its value when it is operated independently. Doing so should maximize shareholder’s wealth. In practice, merger analysis is much more complicated and raises a number of complex issues.Today, many valuation techniques exist. This paper centers on the discounted cash flow and the market multiple analysis methods. No matter the method used, it is important to know that the target company in general does not continue to operate as a separate unit. The acquired firm becomes part of the acquiring firm’s assets. This is important to consider because the operational changes that occur significantly influence the value of the business. For that reason those changes have to be considered. As a methodology, discounted cash flow is considered the ideal tool to value businesses. This approach is set apart from others because it is based on projected, future operating results rather than on past operating results. Based
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Approximate Word count = 5475
Approximate Pages = 22 (250 words per page double spaced)
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