Nobody downloaded yet

Valuation of Firms in Mergers and Acquisitions - Case Study Example

Comments (0) Cite this document
This paper “Valuation of Firms in Mergers and Acquisitions” seeks to demonstrate the different aspects of mergers and acquisition using a case of two companies: Triumph and Rustic. Mergers and acquisitions form one of the most common corporate strategies in modern organizations…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.5% of users find it useful
Valuation of Firms in Mergers and Acquisitions
Read TextPreview

Extract of sample "Valuation of Firms in Mergers and Acquisitions"

Download file to see previous pages Triumph is of the opinion that acquisition of Rustic, a competitor in the same industry but with a radically different market share, would significantly boost its market penetration, enhance quality in production, and give it immense benefits with regard to economies of scale. As of present, Triumph has a predominantly southern customer base while Rustic has a chiefly northern customer base. The premise for this presumption is the view by Triumph’s CEO that Rustic is underperforming and its shares are undervalued. Hopes regarding the merger and acquisition soar high, with the expectations that the deal will grow the combined business establishment by up to 10%. However, the operating costs will rise by an estimated 5% in the first year. The financing option under consideration involves the issuance of long-term bonds to buy out shareholders at Rustic. The bonds will be issued at the current borrowing rate of the two companies. This report analyses the merger and acquisition case for Triumph and Rustic Plc. The first two valuation cases are highly similar, with the only difference being that the first method assumes a constant dividend in perpetuity while the other DVM option assumes a constant dividend growth in perpetuity. The slight difference, however, makes a considerable difference in the estimated value of the resultant business, 41,000,000 and 90,420,000 respectively. The use of DVM in valuation model is most relevant in cases where the dividend pattern for a company is predictable and highly estimable (Bayrak, 2010). The management at both companies can make use of the method since both companies are currently paying dividends to their shareholders. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Valuation Methods Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Valuation Methods Essay Example | Topics and Well Written Essays - 1250 words. Retrieved from
(Valuation Methods Essay Example | Topics and Well Written Essays - 1250 Words)
Valuation Methods Essay Example | Topics and Well Written Essays - 1250 Words.
“Valuation Methods Essay Example | Topics and Well Written Essays - 1250 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Valuation of Firms in Mergers and Acquisitions

Mergers & Acquisitions its market value or else it could be compared to its per share price on the public exchange. If the bidding firm is seeking to broaden its horizons to diversify the risk, then the cost of capital of the target firm would be investigated for the effect on the consolidated firms (Hunt, 2009). In a number of cases, the valuation technique for the mergers and acquisitions is pretty similar to the other valuation methodologies for a number of purposes. Influential factors which can create the valuation issues are standard of value in any transaction, acquisition premiums versus control...
10 Pages(2500 words)Essay

Mergers and acquisitions

...current issues pertaining to government regulation of mergers and acquisitions in China in comparison to the other developed countries. According to Jackson & Schuler (2000), in a merger, the two firms are supposedly on equal footing after they have been merged where one new company will continue to exist while in an acquisition, it is clear that one firm will take control of the other’s resources. There are various reasons why firms embark on mergers and acquisitions and these include the following: the need to increase their market share, increase their geographic reach as well as...
10 Pages(2500 words)Coursework

Mergers and Acquisitions

..., the organization would be able to increase its earnings per share through a merger with American Airlines. This could help stabilize the company and would make it the second largest in the industry. It seems that international growth, fleet expansion, and/or merging with legacy member is key to the companies ability to survive the consolidating industry in a contracting economy. Hence the key to success for US Airways and American Airlines will be found in their ability to generate enough revenue to either expand their fleet or to attempt strategic acquisitions of smaller firms operating in strong local markets. IX. Summary Over the last decade the industry has experienced a great deal...
10 Pages(2500 words)Essay

Mergers & Acquisitions

...when the value of the combined firm is greater than the sum of the values of the individual firms. Managers are assumed to be motivated by shareholders' interests to create economic value, and to have the ability to judge accurately the value potential of the combined firm. Other explanations do not assume value-maximizing behavior on the part of managers. The managerialism hypothesis suggests that managers embark on acquisitions to maximize their own utility at the expense of the shareholders of the firm. The hubris hypothesis suggests that bidding firm managers make mistakes in evaluating target firms, but undertake...
8 Pages(2000 words)Essay

Mergers and acquisitions process

...Chapter 10: Mergers and Acquisitions Mergers and acquisitions (M&A) involve a bidding (buying) firm buying a target firm and are a way for companies to grow through a strategy of corporate diversification and vertical integration. Empirical evidence shows that an M&A strategy is more successful if both firms are strategically related than unrelated. The acquisition of related targets creates economic value, but the value is captured by the owners of target firms while the owners of bidding firms break even or, as studies showed, at the least M&A does not decrease the...
4 Pages(1000 words)Essay

Mergers & Acquisitions

...Mergers & Acquisitions - An Introduction The term 'merger' is often abused, by being loosely applied to refer to any form of business combinations. It has however got a specific connotation. A merger actually refers to a business combination of two or more firms in which only one firm survives and the other firm or firms go out of existence. In a merger, the surviving firm acquires the assets and liabilities of the other firm(s). A relevant example here is the recent merger of HDFC Bank and Times Bank. After the...
8 Pages(2000 words)Essay

Mergers & Acquisitions

... pay? [online] available at: * Mergers and Acquisitions [online] available at: * P/E Ratio [online] available at: * P/E Ratio [online] available at: * Stock valuation based on earnings [online] available at: (Calculations on the basis of Current exchange rate of 1 pound = 1.96 USD)... Mergers and Acquisitions (a) In the proposed merger between Smith plc and Amanda plc, two options for issue of shares may be explored. The...
4 Pages(1000 words)Essay

Mergers & Acquisitions

.... Such valuation determines the amount that is to be paid to the share holders of the acquired company by the acquiring company. Though there are quite a few method of valuation, the firms basically choose the one that befits them. The modern market predominantly finds ‘Stock Market Driven Acquisitions’ (Vishny, 2002). Also, there are many other methods of valuation of a company in case of mergers and acquisitions and such methods include Net Present Value Method, Adjusted Present Value Method, Venture Capital Method, First Chicago Method among many others (Bapat, 2004). Hostile Acquisition of Samarec As...
15 Pages(3750 words)Essay

Mergers and Acquisitions: Hostile Mergers

...: an integrated approach to process, tools, cases, and solutions. Elsevier. UK. Robert, B. 2011. Applied merger and acquisition workbook. John Willey and sons. US. Sherman, A. J. and Hart, M. A. 2006. Mergers and Acquisitions From A to Z. AMACOM Div American Mgmt Assn. Ullrich, S. and Piero, M. 2004. Managing Complex Mergers: Real World Lessons in Implementing Successful Cross-cultural Mergers and Acquisitions. Financial Times/Prentice Hall. US. Zabihollah, R. 2011. Financial Services Firms: Governance, Regulations, Valuations, Mergers, and Acquisitions. John Wiley and sons. US.... Table of Contents Introduction 2 Case study- ArcelorMittal 2 Mittal Steel Company and Arcelor 2 1.Strategy 3 Why the changes...
11 Pages(2500 words)Essay

Mergers& Acquisitions

...US Airways and American Airlines Merger al Affiliation: Us Airways and American Airways Merger Introduction Merging refersto the situation whereby two established company’s linkup and form a new company. The merging companies share the securities depending on the terms agreed on during the contract. The main reasons for merging are profit maximization, diversification, and expansion. Companies may also merge in order to overcome forces of competition by increasing economies of scale. Many companies have merged due to diverse reasons depending on their situations and market scenarios. This paper will discuss the merger that took place between the US airways and the American airways which...
4 Pages(1000 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic Valuation of Firms in Mergers and Acquisitions for FREE!

Contact Us