Question

Can I get an example of a M&A proposal to calculate the value of a company using the DCF model?

Answer 1

M&A is a merger and acquisition.merger and acquisition valuation module describe the background for M& A banking that most investment bankers will need to know particularly from the perspective of valuation.

There are variety of ways to value A company the valuation method includes:-

• Discounted cash
• Public comparables
• Acquisition comparables
• Merger analysis
• Leveraged buyout
• Other techniques

Each of theseincluding acquisition comparables is very important in investment package and is discussed in the module and marger analysis is also known as merger consequences analysis.

Reasons for pursuing M&A

M&A is a corporate strategy that may increase value for the acquired by creating an important value driver known as synergies(ways to increase profit / earning through an acquisition) among other reasons. Synergies chata rice from an M&A transaction for a variety of reasons:-

• Increase and diversify sources of revenue by the acquisition of new and complementary product and service offerings(revenue synergies).
• Increase production capacity through acquisition of workforce and facilities (operational synergies).
• Increase market share and economies of scale(revenue synergies/ cost synergies).
• Increase operational efficiency and expertise(operational synergies/cost synergies).
• Reduction of financial risk and potentially lower borrowing cost(financial synergy)

The acquisition of another company may also be defensive with nature .for example a large company mein wish to ekvira small but growing company if the small company has a substantial competitive advantage over the large company, such as an important technology or patent, or superior product offering. This may protect the aquarium from serious competitive consequences, as the small company may overtime be able to grow on its own and eat into the large companies business.