Abstract In view of the inadequacy of investment valuation under uncertainty by the orthodox discounted cash flow (DCF), many scholars have begun to study the investment under uncertainty. Option pricing theory (OPT) is the representative result of this study. As we know, the prerequisite of a successful merger lies in a proper valuation of the corporation merged, which makes it objectively necessary to study the real options approach in M&A. This thesis carefully studies the orthodox valuation principles in current mergers by analyzing and calculating the real options in M&A, and then puts forward and examines its practical framework through comparing the orthodox valuation approach (i.e. the approach based on earning, the approach based on assets and DCF approach) and the real options approach. This thesis first reviews the options theory, real options theory and M&A theory, and then compares with the orthodox valuation approaches in M&A. On the basis of the comparison between OPT and DCF, the author makes an induction of the real options approach and its practical framework in M&A and examines and analyzes a case of listed corporation merger. Finally, the author puts forward further research on combining the real options approach with game theory. This thesis consists of five chapters. Chapter One is an introduction, discussing the purposes, meaning and structure of this thesis. Chapter Two is a literature review including the options theory, real options theory and M&A theory. Chapter Three is a comparison between the orthodox valuation approach and real options approach in M&A. It explains the DCF, assets approach and earning approach respectively and their limitation in practice and then compares the orthodox valuation approach with real options
Abstract approach. Chapter Four is about the real options approach. In this chapter, the author talks about the practical framework and pricing of real options in M&A and examines and analyzes a case of listed corporation merger. The last chapter is the conclusion, summing up the research results and further discussing real options in M&A under the circumstances of a dynamic market and competitive opponent actions.
1 [] 2001 2 1
2 3 P31 4 [] 1997 5
3 6 2001
7 8 [ ] 2000 [] C. L. C. 2000 4
9 Call Option Put Option 10 11 12 13 ~ * * ~ * Pr ob S S S = S = F S S; τ { } ( ) 5
14 15 6
16 Lander, D.M. and G.E. Pinches( 1998), P537-567. 7
8
9 17
10
11
V = CFt = (1 + r = t n t t 1 ) 18 19 12
CFTE = = t t t t = 1 (1 + ke ) 20 21 13
CFTF = t = t t t = 1 (1 + WACC ) 22 []Aswath Damodaran 1999 23 14
15 24
16
17
rt c = S N d ) Xe N( ) p = Xe 0 ( 1 d2 rt N( d2) S0N( d1 ) 1n( S d = 1 0 2 X ) + ( r + σ 2) T σ T d 2 2 1n( S0 X ) + ( r σ 2) T = = d1 σ σ T T 25 BS 26 18
d p = 1 u d [ pf + ( 1 p f ] rt f = e u ) d 27 rt c + Xe = p + S 0 28 29 []Aswath Damodara 1999 P14 19
20
21 30 [] 2001 P52-56 31 32
33 Copeland, T., T. Koller and J. Murrin( 2000), P395. 34 []Aswath Damodaran 1999 P323 22
23 35 35 1 2 3 4
24 36 Growth Options
25
26
27
28.
37 Trigeoris 1995 1996 1999 29
α α 38 1999 39 α = α RP 40 RP Equilibrium Total Expected Rate-of-Return Rate-of-Return Shortfall BS δ 30
31 ( ) t t t dz dt RP V dv α +σ = RP α t t t t t t t t rf t F V F V RP r V F V = + + ) ( 2 1 2 2 2 2 σ
41 42 32
I I E E E E + = max( V = max( V +, xv, xv + I I E E ) ) 33
34 43 44 A 1 A 2 B 2 B 1 B T
45 2002 7 27 35
36 46
37
47 48 49 38
50 51 2001 9 10 1.31 52 2001 10 1 2002 3 1200 2002 4 1 9 2000 2002 10 1 2003 3 3000 39
40 1200 2000 3000 10800 29.3%
53 1996-2001 54 1999-2001 55 56 CAPM A 57 58 http://www.info.gov.hk/hkma/chi/statistics/index.htm 59 B 41
42
43
44
45
46 60
R(V) NPV R(V ) I I V 61 62 Game Theory 47
3 3 4 0 2 2 0 4 48
49
50
51
52
53
54
55
56 73.
57
A R i = R + β f i ( R R ) m f 63 63 http://www.info.gov.hk/hkma/chi/statistics/index.htm 58
B S u = ln i Si i 1 s = 1 n 1 n i= 1 u i u ln S T S 2 σ ~ Φ µ T, σ 2 2 T 0 * s σ = s = σ T τ τ 59
60