about acquisition and mergers

1. P R E S E N T E D B Y
S H R I K U M A R H D
1 4 Y A M C D 1 8 3
Concept of Value in Merger &
Acquisition. Approaches to Valuation in
Case of M &A and Selection of
Appropriate cost of Capital of capital for
Valuation

2. Introduction
 The term “valuation” implies the task of estimating
the worth value of an asset , a security a business.
 The price an investor or a firm is willing to pay to
purchase a specific asset security would be related to
this value.
 In the most general sense the terms mergers and
acquisitions refer to the exchange of ownership
control of business enterprise.

3. Cont……
 Company A and company B may merge and form a
new composite company; company A may purchase
or acquire company B or vice versa.
 In either situation it is imperative that both
companies should be valued either formally or
informally.

4. Concept of value in merger &Acquisition
 Insurable value
 Economic value
 Liquidation value
 Book value
 Fair market value
 Goodwill value
 Value in use and value in exchange

5. Approaches to valuation in Merger &
Acquisition
 Discounted cash flow Approach
 Relative valuation Approach
 Contingent claim Valuation
 Asset Based Approach

6. Selection of Appropriate Cost of Capital
for Valuation
 The various sources of funds need to be considered
in computing the cost of capital of a company.
 Sources of funds may be debentures, equity shares,
preference shares, retained earnings , etc..

7. Valuation methods
Capital Asset pricing model
Arbitrage prancing Theory
Fama/French Three Factor model
Discounted Cash Flow Approach.

8.  THANK YOU