Independent valuation of companies for merger and acquisition

Valuation of companies for merger and acquisition

The increasing pace of the economy globalization makes it all the more urgent to handle the issues of mergers and acquisitions (M&A) professionally. Asset consolidation and the concentration of production activities resulting from mergers and acquisitions significantly improve the efficiency of capital use as a result of its growth. At first, this is achieved thanks to the synergy effect, i.e. the results, obtained from the stacking effect regarding the interaction of two or more factors, far exceed the sum of their simple addition.

This is the very reason why an independent valuation for merger and acquisition is critical. In order not to make a mistake when achieving this synergy effect, it is necessary to know a fair value of each separated company and combined cash flows, which a company can generate as the result of a merger.

An independent valuation for company mergers gives all participants an unbiased opinion from the outside, defines potential risks and identifies related opportunities. A fair valuation for a merger allows the absorbing company to determine the real value of the business it buys, and thoroughly calculate the synergetic effect of the merger.

According to research more than one third of merger and acquisition transactions fail. This occurs when the inflated expectations of the transaction result in a lower than expected outcome. The use of independent appraisers to conduct a valuation for mergers and acquisitions will, undoubtedly help you create the most effective model of business reorganization.
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