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National Research University Higher School of EconomicsStudent ThesesCompanies' Valuation For Mergers And Acquisitions Deals
Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Ksenia Gusarova
Companies' Valuation For Mergers And Acquisitions Deals
Finance
(Master’s programme)
2016
Company's valuation is one of the most important factors in choosing an object of mergers or acquisitions which is formed in the systematic diagnostics of deals options. To assess the value of companies involved in mergers and acquisitions, as well as in determining additional gains of the merged company due to synergies, we use business assessment tools. In this work we considered the main approaches to the valuation of companies in mergers and acquisitions deals and determined the most appropriate method , which will lead to the most significant results of the assessment and will help to evaluate the synergies from the merger. The purpose of the paper is to evaluate companies taking part in M&A deal. The paper presents the income approach, in particular the discounted cash flow method, as it is the most suitable for company assessment in M & A deals. At the same time it requires various of assumptions and corrections which have to be forecasted realistically. The rate of return on equity was calculated separately for each company, and weight average cost of capital (WACC), taking into account the capital structure and the impact of market performance. Then we forecasted Free Cash Flow To Equity (FCFE) in the 5 years of the forecast period, adjusted for inflation, estimated terminal value, determined the present value of cash flows, and at the end the total value of the company calculated as the sum of the values of the forecast and terminal period. Then we made some assumptions on growth of the company after aquisition and again forecasted cash flows of the combined company with synergy. At the end of the assessment we determined the cost of synergy, which confirmed the effectiveness of the deal.

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