Book Value Method relies on the accounting record, which equals to total asset minus total liability. The advantage of this method is that it’s reliable and easy to calculate and understand. The drawback of this method is that it ignores the fluctuation of asset price and future profit-making capability of the company.
The concept and steps of the Comparable Transaction Method are similar to those of Comparable Company Method, except that this method uses similar M&A transactions to compare. The disadvantage of the method is that sometimes it’s difficult to find out similar M&A transactions.
Following steps need to follow: a)Choose a set of sample company which is similar to the target company b)Determine Valuation Index which are generally Net Income, Dividend, Cash Flow, or Book Value of Asset etc. c)Calculate valuation Ratio, which can be one of the following Stock Price / Earnings per share Market Value / Equity […]
The calculation method and steps of the Discounted Income Method are similar to those of DCF model, except that discounted item is income. The advantage of this model is that it can objectively reflect the company’s performance. However, the disadvantages are that Income can be easily manipulated and it does not take into account the […]
The calculation method and steps of the Discounted Dividend Method are similar to those of DCF model, except that discounted item is the dividend. Since Chinese companies do not distribute dividend frequently, this method is not applicable in China.
There are two methods to determine the discount rate in DCF model: a) Weighted Average Capital Cost: K=We*Ke+(1-We)*Kd*(1-t) Where, K——weighted average capital cost of the company Ke——capital cost of equity Kd——capital cost of long-term debt before tax We——the ratio of equity to total asset t —— income tax rate b) CAPM Ke=Kf+β*(Km-Kf) Where, β—— market risk […]
The calculation formula is:
V=∑CFt/(1+i)
a) The successful application to holding 2008 Olympic game, the entrance to WTO and also the successful holding of APEC Conference have demonstrated the great development potential of China as well as the unlimited investment opportunity in Chinese capital market. b) The incorporation of reform and opening policy into law system has guaranteed a stable […]
Indirect M&A follows two steps as below： a) Set up a new subsidiary company or holding company; and b) Merge the target company through the newly established company
Direct M&A is a purchase method where the purchasing company directly buys the asset and/or equity of the target company. The legal entity of the newly established foreign invested company can be either the purchasing company or the target company. The legal entity should not only take over the assets but also the liabilities.
