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National Research University Higher School of EconomicsStudent ThesesEvaluation of acquisition premium by the example of IT- companies

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Dar`ya Buly'cheva
Evaluation of acquisition premium by the example of IT- companies
Faculty of Economics
Bachelor’s programme
2014
Bachelor’s study on a subject: “Evaluation of acquisition premium by the example of IT- companies” contains 8 drawings, 34 tables, 9 formulas and 3 appendices. The volume of work is 91 pages. There were used 46 sources for writing the study. Key words: mergers, acquisitions, premium, information technology, information asymmetry, regression model.The premium size in M&A deals has an essential meaning for both of acquirers and targets. For an acquirer It is important not to overpay and for a seller – to get not less than the fair value of a company or part of a business. The attention to the problem of the premium assessment is connected with the fact that M&A deals can finally be unprofitable for the acquirer. Therefore, the correct evaluation of a premium size paid in M&A deals of merge is a relevant problem nowadays.The objective of this research is the analysis of premium formation in M&A deals made by IT companies. Subject matter of the study are merges and acquisition deals in information technology industry. Scope of the study are premiums paid by IT companies during M&A deals .During my study of science literature it was revealed that the majority of studies related to the problem of a acquisition premium assessment are written by foreign authors, and in the Russian literature features of an acquisition premium formation are insufficiently studied, and also there is a limited number of empirical researches concerned an acquisition premium valuation. Scientific novelty of the study means premium calculation in M&A deals of which are carried out by the companies of information technology industry. The practical significance of work is that the regression model constructed as a result of research can be used by company management in order to predict a price for future deals.In the first chapter there are given some definitions concerning M&A deals, there is a classification of deals, motifs of M&A process are defined, moreover there is a review of M&A market in IT industry and in general. The second chapter deals with the definition of the acquisition premium, there are defined some basic methods and approaches for premium calculation and marked some factors, which define its value. The third chapter consists of the econometric research, which defines key variables for the premium size in M&A deals, regression models that are formed with a different set of variables, and then the model which is best describing formation of an acquisition premium. On the basis of data of mergers and acquisition deals, carried out to the period from 2008 to 2013 the IT companies, was calculated a dependent variable – premium for M&A and defined factors which could influence the premium size. Financial performance of the company purpose and the characteristic of the transaction were these factors. The resultant model showed that premium increasing is influenced by revenue, equity, initial stake, and acquired stake. Also it showed that with increase in number of outstanding shares, market capitalization and operating profit of the target the premium size decreases.

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