Objective valuation Specifically, objective valuation is mainly based on discounted cash flow method (DCF or DDM), supplemented by multiple valuations. The former is that after the buyer's investment bank is invited to the online database (VDR), it is structured according to the company's business sector and major commercial contract terms. The most important assumptions in the discounted cash flow model are related assumptions, such as macro inflation, the future business development of the target and the market development of the target. These indicators are professional opinions that investment banks can't give, so in this process, relevant market consultants and technical consultants are usually hired. Multiple valuations are common. Find out the similar companies that are most comparable to the target company among the global companies, and take the common economic indicators and technical indicators such as EV/EBITDA, EV/BBL, EV/MW and EV/tone as multiples, and guess the valuation interval according to the actual situation of the company. It can be seen that the "objective" valuation itself consists of different methods and different assumptions in a single method, so the investment bank will propose a price range for customers in the final quotation proposal. 2. Synergy effect is rare in overseas M&A, because the goal of overseas M&A of China enterprises is often to supplement strategic shortcomings, and there is no direct collaborative business provided to counterparties. The financing cost of central enterprises is often unmatched by overseas companies. Especially during the European debt crisis, many outstanding listed companies were dragged down by the rating of their host countries, and the market financing cost increased greatly. Therefore, the low-interest shareholder loans/follow-up capital injection terms provided by central enterprises are very competitive for sellers. This process involves tax/capital flow, which requires the professional opinions of the four major tax teams. 3. Bidding premium When a high-quality company/asset is sold in the market, the seller's investment bank often sets up a list of 10- 15 global potential buyers. And send the preliminary recommendation materials to the potential buyer/buyer's investment bank. The formal sales process usually consists of two parts. The first part is a non-binding offer, and each buyer submits a share purchase agreement marked on the received unified share purchase agreement, including an intentional bid. Through this round, 3-5 companies were selected to enter the second round of binding quotation, and after supplementary due diligence and other processes, the final quotation was provided by each buyer. On this basis, the final winner is selected. It can be seen that the whole process will be a battle of wits with other potential bidders, and the seller's bank will also fan the flames, so the final quotation is often at the high level of the objective valuation range, even exceeding the objective valuation range. Due to the large-scale acquisition of central enterprises at sea, that is, in recent years, due to cultural differences and other reasons, many extremely subtle but thrilling things have happened in the process of fighting with other bidders. 4. Some opening remarks say that central enterprises often have to pay an extra premium or not refund the deposit when they go to sea, because our internal approval is too deceptive. Due to various political considerations, the National Development and Reform Commission requires enterprises to bid successfully before applying for approval. However, in the share purchase agreement of the second round of bidding, the approval of the buyer's domestic department will be the prerequisite for bidding. So the two are prerequisites for each other. This situation has brought great disadvantages to central enterprises, because the approval of overseas mergers and acquisitions by the National Development and Reform Commission is really not easy to get, and I don't know when it will be available. As a seller, the biggest worry is that after the two parties sign the sales agreement, they can't deliver the goods for a long time because they are stuck in the approval process. In order to solve this problem, central enterprises often have to pay a premium or a non-refundable deposit in advance. This sentence sounds simple and difficult to operate. Investment banks are often reluctant to participate in this process because it is extremely sensitive. Of course, at the beginning of the year, the National Development and Reform Commission issued a system that only recorded the acquisition amount of $654.38+0 billion or less, but the merger and acquisition of central enterprises was rarely less than $654.38+0 billion, so it did not solve the problem substantially, but it was indeed a good start. 5. Summary Personally, I think overseas M&A is the most interesting project in investment banks, which makes it easier for participants to see the industry rules and internal rules. In the past, the "going out" strategy of central enterprises was vigorously implemented with different effects.
-Reprinted by Dianjinren
2. How is the M&A price determined in M&A transactions?
Net asset value evaluation
Book value method. The balance sheet of a company in each fiscal year can best reflect the value of the company at a certain point in time, which reveals the resources held by the enterprise, the debts undertaken by the enterprise and the rights and interests owned by the owners in the enterprise. The net value of the company's assets and liabilities is the book value of the company. However, if we want to evaluate the true value of the target company, we must also make necessary adjustments to the items in the balance sheet. For example, in the adjustment of asset items, we should pay attention to the possible bad debt loss of the company's accounts receivable, the exchange loss of the company's foreign trade business, whether the market value of the company's securities is lower than the book value, and whether the depreciation method of fixed assets, especially intangible assets, is reasonable. The evaluation of patent right, trademark right and goodwill is very flexible. When adjusting the items of liabilities, it is necessary to check whether there are unrecorded liabilities, such as employee pensions and accrued expenses, and pay attention to whether there are guaranteed or unapproved liabilities and taxes. After evaluating the assets and liabilities of the target company, both parties can negotiate these projects one by one and get the company value acceptable to both parties.
Current market price method. The current market method, also known as the market method, is an evaluation method that selects one or several companies similar to the evaluation object as reference objects or price standards, analyzes and compares the trading conditions of the reference objects, makes comparative adjustments, and determines the value of the evaluated companies. The theoretical basis of current market price method is the principle of market substitution. In asset trading, any buyer will choose assets with great utility and low price. In the evaluation process of current market price method, firstly, the evaluation object and evaluation index are defined, then the information of reference object is collected, and the reference object is determined by analyzing the information. Finally, compare the difference between the reference object and the appraised object and the price difference reflected by the difference, and get the value of the appraised object after adjustment. The premise of applying the current market price method is a fully developed and active market. Only when such a market exists can we select enough reference objects from the market for comparison, analysis and pricing. China is currently strengthening the construction of the capital market. With the continuous development of the capital market, the current market price method will be more widely used in value evaluation.
Evaluation of going concern value
Income present value method. It is an evaluation method to discount the expected future income of the company to the present value of the evaluation base date with an appropriate discount rate, and then determine the value of the company. The principle of the present value method of income is that the acquirer buys the target company because the target company can bring benefits to itself. The higher the company's income, the higher the purchase price. Therefore, it is a scientific and reasonable method to determine the value of a company according to the income level it can bring. This method involves the evaluation of the life expectancy of the target company. Life expectancy refers to the period from the evaluation benchmark date to the company's loss of profitability. Companies have a life cycle. When evaluating the company's value with the present value of income method, we should first judge the company's economic life. If the estimated economic life is too long, the company value will be overestimated, and vice versa. In western countries, life expectancy is generally limited to 5 years to 10 years.
Price-earnings ratio method. The price-earnings ratio method is a method to determine the value of the target company according to its income and price-earnings ratio. The process of applying the price-earnings ratio method to evaluate the company's value is as follows.
Check and adjust the recent profit performance of the target company. For example, when looking at the company's recent income statement, we should consider whether the accounting policies followed by these accounts are consistent and in line with national regulations, and adjust the profits announced by the company when necessary.
Select the indicators used to calculate the company's valuation income. It is more appropriate to take the average after-tax profit of the company in the past three years as the valuation income index. In fact, the valuation of the company should also pay more attention to its income after the merger. If the acquired company has a strong advantage in management and the target company can obtain the same rate of return as the acquired company under effective management, it will be more instructive to calculate the after-tax profit of the target company after merger and acquisition as the valuation income index.
Select the standard price-earnings ratio. There are usually several standard P/E ratios to choose from: the P/E ratio of the target company M&A, the P/E ratio of companies comparable to the target company, and the average market profit of the target company's industry. When choosing, we must ensure comparability in terms of risk and growth. The standard P/E ratio should meet the requirements of post-merger risk and growth, not just historical data. At the same time, in practical application, the above standard P/E ratio should be adjusted according to the expected situation of the target company.
Calculate the company value. Company value is the product of valuation income index and standard P/E ratio.
Collaborative value evaluation
The evaluation method of company synergy value is mainly income present value method. Different from evaluating the value of going concern, it is necessary to increase the benefits generated by synergy when estimating the expected benefits, that is, to calculate and interpret the new benefits and cost savings item by item. Usually, after the target company is merged, due to the cooperative relationship, it will grow abnormally at the initial stage, and then it will enter a mature stage and grow steadily at a low speed.
Strategic value evaluation
There is no fixed evaluation method for strategic value. When the strategic purpose of the acquired company is different, the value evaluation methods of the target company are also different. However, one thing is the same, that is, if the acquiring company does not conduct mergers and acquisitions, the cost of achieving strategic goals through other means is the standard to measure the strategic value of the target company. For example, in order to acquire the market occupied by the target company, the strategic value of the target company is mainly the price paid by the acquiring company to occupy the market itself. Another example is that the acquisition company wants to acquire some know-how of scarce resources and the status of listed companies owned by the target company, so the strategic value of the target company is the cost of the acquisition company to abandon mergers and acquisitions and develop scarce resources on its own.
-Reprinted by Dianjinren
3. How is the M&A price determined in M&A transactions?
Net asset value evaluation
Book value method. The balance sheet of a company in each fiscal year can best reflect the value of the company at a certain point in time, which reveals the resources held by the enterprise, the debts undertaken by the enterprise and the rights and interests owned by the owners in the enterprise. The net value of a company's assets and liabilities is an estimate of the true value of the target company, and necessary adjustments must be made to each item in the balance sheet. For example, in the adjustment of asset items, we should pay attention to the possible bad debt loss of the company's accounts receivable, the exchange loss of the company's foreign trade business, whether the market value of the company's securities is lower than the book value, the depreciation method of fixed assets, and the evaluation of patent rights, trademark rights and goodwill are flexible. For the adjustment of debt items, check whether there are unrecorded expenses, etc. , and pay attention to whether there are secured or unapproved liabilities and taxes. Buyers and sellers of the target company can negotiate one by one for these projects and get the company value acceptable to both parties.
Current market price method. The current market price method, also known as the market method, is an evaluation method that selects one or several companies similar to the evaluation object as reference objects or price standards through market research, analyzes and compares the trading conditions of the reference objects, and makes comparative adjustments according to the numerical values. Principles of current market generation. In asset trading, any buyer will choose the utility price method. In the evaluation process, the evaluation object and evaluation index are defined first, and then the information of reference objects is collected. Through the analysis of information, the difference of the evaluation object of the reference object and the price difference reflected by the difference are determined. After adjustment, the premise of evaluating the consideration method is to have a fully developed and active trading market. Be able to select enough reference objects from the market for comparison, analysis and pricing. At present, China is strengthening the construction of capital market, and with the application of capital market method in value evaluation, it will be more extensive.
Enterprises that are operating and making money.
Income present value method. It is an evaluation method to discount the expected future income of the company to the present value of the evaluation base date with an appropriate discount rate, and then determine the value of the company. The reason why the income present value method acquires the target company is because the target company can make a lot of money and the purchase price will be high. Therefore, it is a scientific and reasonable method to determine the value of a company according to the income level it can bring. This method involves estimation. Life expectancy refers to the period from the evaluation benchmark date to the company's loss of profitability. When evaluating the company's value with the present value method, we should first judge the company's economic life. If the estimated economic life is too long, the company value will be overestimated, and vice versa. In western countries, life expectancy is generally limited to 5 years to 10 years.
Price-earnings ratio method. The price-earnings ratio method is to determine the price-earnings ratio of the target company and evaluate the company's value according to its income and price-earnings ratio.
Check and adjust the recent profit performance of the target company. For example, when looking at the company's recent profit and loss statement, we should consider whether the accounting policies followed by these accounts are consistent and in line with national regulations, and adjust the profits announced by the company when necessary.
Select the indicators used to calculate the company's valuation income. It is more appropriate to take the average after-tax profit of the company in the past three years as the valuation income index. In fact, the valuation of the company should also pay more attention to its income after the merger. If the acquired company has a strong advantage in management and the target company can obtain the same rate of return as the acquired company under effective management, it will be more instructive to calculate the after-tax profit of the target company after merger and acquisition as the valuation income index.
Select the standard price-earnings ratio. There are usually several standard P/E ratios to choose from: the P/E ratio of the target company M&A, the P/E ratio of companies comparable to the target company, and the average market profit of the target company's industry. When choosing, we must ensure comparability in terms of risk and growth. The standard P/E ratio should meet the requirements of post-merger risk and growth, not just historical data. At the same time, in practical application, the above standard P/E ratio should be adjusted according to the expected situation of the target company.
Calculate the company value. Company value is the product of valuation income index and standard P/E ratio.
Collaborative value evaluation
The evaluation method of company synergy value is mainly income present value method. Different from evaluating the value of going concern, it is necessary to increase the benefits generated by synergy when estimating the expected benefits, that is, to calculate and interpret the new benefits and cost savings item by item. Usually, after the target company is merged, due to the cooperative relationship, it will grow abnormally at the initial stage, and then it will enter a mature stage and grow steadily at a low speed.
Strategic value evaluation
There is no fixed evaluation method for strategic value. When the strategic purpose of the acquired company is different, the value evaluation methods of the target company are also different. However, one thing is the same, that is, if the acquiring company does not conduct mergers and acquisitions, the cost of achieving strategic goals through other means is the standard to measure the strategic value of the target company. For example, in order to acquire the market occupied by the target company, the strategic value of the target company is mainly the price paid by the acquiring company to occupy the market itself. Another example is that the acquisition company wants to acquire some know-how of scarce resources and the status of listed companies owned by the target company, so the strategic value of the target company is the cost of the acquisition company to abandon mergers and acquisitions and develop scarce resources on its own.
-Reprinted by Dianjinren
Fourth, the calculation of M&A enterprise value
The book value method is a method to evaluate the liquidation property according to the book value of the property, that is, the historical value MINUS depreciation. According to the book value, it is:
The inventory is 77.8 million yuan, and the building103.8 million yuan.
Mechanical equipment is 37.6 million yuan, and transportation equipment19.2 million yuan.
Accounts receivable 159.2
The above adds up to 397.6 million yuan. That is, the total assets are 397.6 million yuan, which is the book value of company B.
The price-earnings ratio method refers to estimating the enterprise value with the industry average price-earnings ratio. According to this valuation method, the enterprise value comes from the pricing of comparable assets or enterprises. Assuming that other enterprises in the same industry can be regarded as "comparable enterprises" of the evaluated enterprises, the enterprise performance reflected by the average P/E ratio is reasonable and correct. Price-earnings ratio valuation method is usually used to evaluate enterprises that have not publicly issued shares or enterprises that have just publicly issued shares.
Then get two data:
The net profit after tax in one fiscal year is 34.4 million yuan; The book value of the company is 397.6 million yuan; Then the current P/E ratio of Company B is:11.558;
The P/E ratio of listed companies similar to Company B is 1 1, so 34438+0438+0 = 378.4.
According to the price-earnings ratio method, the value of Company B is 378.4 million yuan.
Please advise.