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Global Mergers and Acquisitions by Yuqin Zhang, Abdol S. Soofi

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Chapter 7

Alternative Approaches to Valuation

This chapter deals with alternative approaches to company valuation for the purpose of merger and acquisition (M&A). Naturally, accurate assessment of the value of the target firm, and determination of the fair price investors should pay for the entity in a competitive market, is critically important for the financial success of the acquisition. However, even though determination of a fair price is the necessary condition for success it is by no means a sufficient condition for eventual success of the combination because a fair price cannot guarantee smooth, successful postmerger integration of the entities.

Several methods for company valuation exist.1 In this chapter, we examine three approaches ...

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