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Valuation in M&A of Biotech Industry

Author: JiangXun
Tutor: TangJianXin
School: Wuhan University
Course: Business Administration
Keywords: Biotechnology M \u0026 A Valuation Real Option Method
CLC: F426.7
Type: Master's thesis
Year: 2005
Downloads: 161
Quote: 0
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Abstract

The biotechnology industry is a sunrise industry in the 21st century, it will be in conjunction with the computer and its information industry to guide the future trend of social progress. Its huge market prospects also stimulated the rapid development of the biotechnology industry, Looking at the global, European and American biotechnology industry is gradually mature, technology, and scale the forefront of the world, while China's biotechnology industry has developed rapidly, but the overall level remains The big gap, after joining the WTO, is bound by the strong impact of the foreign biotechnology companies in Europe and the United States, in this case, the merger and reorganization is an effective way to enhance their core competitiveness of China's biotechnology industry. The hot topic in wave after wave after wave of mergers and acquisitions, and mergers and acquisitions boom of the biotechnology industry is also quietly rising, mergers and acquisitions and how to successfully become many scholars and Thinking. This paper describes the content and direction of mergers and acquisitions is the success key step - Valuation designed through the analysis of the characteristics of the biotechnology industry, as well as the valuation method to find a most reasonable and most truly reflect the value of biotechnology companies method of valuation, mergers and acquisitions in order to reduce the risk and improve the success rate of mergers and acquisitions. There are four main traditional valuation methods: adjust the book value method, the market value method, the direct comparison method and the discounted cash flow method. Traditional valuation methods tend to analyze existing enterprise value, or is difficult to assess the future profit opportunities. Biotechnology companies, we know there are a few of the most significant characteristics: First, the great value is to have the opportunity in the future, that is, the value of corporate real options constitute an important part of the company's value; course of development of biotechnology is a multi-stage , real options constitute more often than not a single; operational risks, the prospect of strong uncertainty, more difficult to forecast cash flow. As can be seen from the above characteristics, traditional valuation methods for the assessment of biotechnology companies have significant limitations. Real options method is a good solution to the above problem. Practice, the types of real options: grow up, wait or postpone, abandon, contraction, conversion, phased investment options, an enterprise often have complex real options, real options application main difficulty lies in identifying compound real option source of mutual relations to the accurate assessment of corporate real options. Specific assessment, we introduced the classic Black-Scholes real options model to assess the value of real options, and the combination of the discounted cash flow method, real options valuation framework: enterprise value = present value of the option value. In this paper, in the final valuation of the discounted cash flow method, and real options method used in the valuation of biotechnology companies has grown options, real options method can prove this case for biotechnology companies biotechnology company merger cases contrast more realistic, apply.

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