Chapter 11

Target Valuation in Cross-Border Mergers and Acquisitions

So far we have discussed target company valuation methods within a country with value expressed in local currency units. However, cross-­border mergers and acquisitions (M&As) involve foreign currencies and exchange rates. In this chapter, we will discuss exchange rates, cross-­border valuation of cash flows, cross-border valuation of target companies, exchange rate determination, and related concepts and theories.

The Nominal Exchange Rate and Currency Transactions

A nominal exchange rate is the price of one currency in terms of another one. Foreign exchange or foreign currency transactions take place in foreign exchange markets. The foreign exchange market is an over-the-counter ...

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