Modeling of Mergers and Acquisitions Value in the Financial Services Sector

In recent times M&A deals has become one of the most effective way to make the company stronger and win additional market share. However, in order to gain positive effects after the completion of the deal, special concern should be brought on the aspect of estimating of the predicted company’s value, which tends to be the key factor of expediency and advisability of the future merger. This paper is aimed to create a model, which will allow to obtain an appropriate valuation of the newly combined company in the financial services sector based on individual financials of target and acquiring companies. As a result, the characteristics of the companies, which have the highest impact on the future value of combined company, were examined and included as variables in resulting formula to forecast its capitalization. The evidence from this study suggests that such characteristics of company’s financial performance as net profit, shareholders equity and return on equity have the most significant effect on the value. The smallest contribution was recorded in relation to the value of the total assets that can be related to the specific features of the sector. Keywords: mergers and acquisitions, company value, market capitalization, valuation methods