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The Study on the Formation Mechanism of the Acquisition Price about the Non-listed Companies

Author: MuZuoHua
Tutor: XiangXianHu
School: Southwestern University of Finance and Economics
Course: Accounting
Keywords: Non-listed Companies Mergers and Acquisitions Price AnalyticHierarchy Process (AHP) the Added Value of M&A theformation mechanism of acquisition price
CLC: F275
Type: Master's thesis
Year: 2013
Downloads: 42
Quote: 0
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Abstract


M&A is the inevitable product of the fierce competition in the market in recent years. There is a rapid growth in Chinese economy since the reform and opening up. Along with the construction of the market economy, China has become one of the most concened markets of mergers and acquisitions by investors worldwide. Though there has been a sluggish global economy in2012, Chinese M&A activity continued to grow this year in spite of the impact of weak external demand, leading the number of deals and the amount of mergers and acquisitions in the Asia-Pacific region. The total amount of M&A in China accounted for29.2%of the Asia-Pacific region. M&A has become the trend of the development of the Chinese market. Meanwhile, with the development of market economy in China, China’s economy has undergone enormous changes, economic growth is accompanied by the re-integration of the industry in China. Chinese state-owned economy has been gradually opening up to the private economy, the non-listed companies is playing more and more important part in the M&A market members. However, the non-listed company does not have a public trading market reaction to its own value; the determination of the acquisition price has no uniform standard of reference. In addition, studies have shown that one of the M&A failure reasons is that the acquirer is not to assess the correct value of the target company. Thus, to study the formation mechanism of the acquisition price of the non-listed companies is of great significance.This paper studies the formation mechanism of the acquisition price of the non-listed companies. The article starts with the definition of mergers and acquisitions, and summarizes the purpose, motivation, effects and risks of M&A with senior scholars’studies. Concerning about the characteristics of non-listed companies, there are three evaluating methods used for non-listed companies: marketing method, income in future method and the asset-based method. Then the paper analyze deeply on the impact of the acquisition price factors of non-listed companies, proposed an acquisition price model, using the Analytic Hierarchy Process (AHP) method to determine the weights of the relevant factors to determine the the coefficient of value, trying to carry out a comprehensive assessment of the acquisition price. Finally, I select two non-listed companies participated in mergers and acquisitions as a case, using the proposed model and ultimately calculate the acquisition price, in order to provide a reference for the related cases.This paper is divided into five parts:The first part is about the introduction. It is an overview of this paper, including the reason about this study, what the background is, what practical significance, then introduces the main contents, points out that the research methods simultaneously. I list a framework of this paper, trying to make the reader get the main content and framework of the full text.The second part is the literature review. In this part I analyze the M&A-related research, including M&A motivations and theories to explain the effects and risks of M&A. Then review the common methods of measuring the actual value. After literature review, I list the related theory of the study to lead the following-up research.The third part is the main part of this article, studying the formation mechanism of the acquisition price about the non-listed companies.There are three parts to consistute the price of M&A---the evaluated price, the price of added value about M&A and other value about risks or others. The most important part is the second part-the price fo added value, which is being studied deeply. I show a process on how these impact factors influence the price of M&A, then elaborate the formation mechanism of M&A price among non-listed companies. I this section, Analytic Hierarchy Process (AHP) is the tool to devide each factor into several sections, then establish a mathematical model, to descript formation mechanism of the acquisition price step-by-step.The fourth part is about the case study of this article. Firstly, I introduce the two sides of this M&A case--FY company and BH company, then explan the conclusion of the enterprise value assessment about BH company. Secondly, I analyze the the value-added factors of mergering BH company according to the third part of the mathematical model, then calculate the weight of each factor before and after M&A, and add other related value of impact factors. Thirdly, give the final conclusion of the M&A price between FY and BH company.The fifth part is the study conclusion, reviewing the contents of this paper and proposing research prospects.The main contribution of this paper is as following:Firstly, I establish a non-listed company merger price model of formation mechanism. I explore deeply in the formation mechanism of M&A price, starting from several impact factors then analyze the pattern they interact, trying to establish a reference foundation of M&A between non-listed companies price.Second, based on previous paper theoretical introduction, I study the case fo FY and BH company, analyze the specific factors affecting the price of M&A, and then use the previously proposed model and method to calculate the final price.The process can be a example for the future non-listed companies in M&A activities.

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CLC: > Economic > Economic planning and management > Enterprise economy > Corporate Financial Management
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