This document discusses various methods for valuing firms for mergers and acquisitions. There are three major techniques: asset valuation, income valuation, and market multiple valuation. Asset valuation values a company based on its assets. Income valuation values based on profit and loss statements by capitalizing earnings. Market multiple valuation values based on comparable public companies and their market ratios. Specific valuation methods are also discussed, including dividend approach, super profit approach, and capital budgeting approach. Buyer and seller valuations can differ based on which assets each party considers relevant. Earnings capitalization method values based on price to earnings ratios and how an acquisition may affect future earnings per share.

1. Merger And Acquisitions Valuation Of Firms

2. Introduction The Device to assess the worth of enterprise so that consideration amount could be quantified. Different regulations under Companies Act 1956 and SEBI Takeover Regulations 1997 are there to regulate the process.

3. Basis Of Valuation Assets Based Method. Capitalized earning Power. Market value. Investment Value. Book Value. Substitution Cost Basis.

5. Income Valuation Approach: Profit and Loss Statement

7. Valuation of unlisted Co. Proxy PE ratio of listed co. is used after suitable adjustment. Other factors like shareholding pattern, voting powers, nature of industry, influence of cyclical business fluctuations, major competitors& their market share , should be taken into consideration while valuation.

8. ASSET BASIS METHOD Fair Value Approach Open Market Value Approach Other Approaches Dividend Approach Super Profit Approach Capital Budgeting Approach

9. Dividend Approach If dividend is Rs 10 per share, Growth Rate 30%, Req rate of ret 15% then share price will be:- Do(1+g)/i-g. Calculation gives value of 35.26

10. Super Profit Approach Premium which the firm will fetch on sale in addition to value of net assets. V = T + P-rT C Where, P=Future Profits, T=Value of Assets, r=Return on Assets, C=rate representing no. of years at which super profits are capitalised. For Ex: if assets is 10,00,000, future profits 2,00,000, capitalisation rate 15%, rate of ret. is 10% So , V=10,00,000+2,00,000-1,00,000 0.15 Thus, V=16,66,667

11. Capital Budgeting Approach Planning Expenditures of capital assets which provide return over a period of time for ex: advertising. V = X(I-T)-I 1+K Where, X= cash Inflows, I=Investment, K= Cost Of capital, T=Tax Rate.

13. Coca-Cola vs Parle

16. Abnormal growth

17. Random FluctuationIII. Cash Flow or Future Earnings : Long run effect of Takeover on EPS