Corporate Valuation

Chapter 14The Acquisition Value

In this chapter, after introducing the principal definitions of value, we will discuss some models useful in the assessment of acquisition value (with reference to either the entire capital of a company or a controlling stake of the company) within transactions aimed at integrating companies such as mergers and acquisitions (M&A) and joint ventures.

We will see how the acquisition value, to a great extent, determines the prices in the market for corporate control¹ and, consequently, the fair market value of companies in every sector.

To present the concepts to be illustrated in the following chapter, we will discuss the mechanisms and the forces responsible for the formation of the prices negotiated between buyers and sellers in the market for corporate control. The indications that can be inferred from the models presented will eventually be linked to the procedure for calculating premiums and discounts in the context of business valuation.

14.1 DEFINITIONS OF VALUE: AN OVERVIEW

In this section, we introduce three definitions of value that assume particular relevance in the area of interest for financial analysts and experts specialized in business valuations.

The proposed definitions are based on the model of determining value that will shortly be made more precise; they explain concepts of value that are clearly differentiated, in relation to specific purposes.

Also in the legal and accounting fields, specific definitions of value (i.e., standard ...