Issue №2, 2019

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Comparative analysis of approaches to valuation of companies in mergers and acquisitions

DOI: 10.34130/2070-4992-2019-2-67-76

Full article 

Evsyukov V. V. — Financial University under the Government of the Russian Federation (Financial University), Tula branch, Tula, Russia; Candidate of Technical Sciences, Associate Professor, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Komov V. A. — Financial University under the Government of the Russian Federation (Financial University), Moscow, Russia; Candidate of Economic Sciences, Associate Professor, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

The decision to merge companies through mergers and acquisitions (M&A) is one of the most difficult tasks in the corporate governance system. This decision involves the determination of the market value of the object of the transaction in conditions of considerable uncertainty due to the influence of political, economic, social factors on the dynamics of the market environment. Different representation of the transaction stakeholders (owners and management of the company, business partners, investors) on the subsequent price movement in the market introduces an additional element of uncertainty in the transaction price setting. The choice of the classical approach to determining the value of the company (comparative, cost or income) is determined by the purpose of the transaction, the level of awareness of the stakeholder, his risk appetite. The purpose of the work is to show the possibility of assessing the value of the company on the basis of a new approach based on the use of neural networks, as well as to conduct a comparative analysis of the practical features of the approaches used in solving this problem. Based on the analysis of the relationships between the indicators of completed transactions for the acquisition of companies accumulated in the Bloomberg Agency, the existence of a stable relationship between the value of the transaction and 6 other indicators characterizing the financial condition of the company. Scientific novelty is the approach to the formation of a model to determine the valuation of the company in the upcoming transaction in the form of a neural network, self-learning based on data on transactions, each of which is described by the values of 7 financial indicators (including the cost of the transaction) of the company. The method of valuation of the company on the basis of neural networks is given, the adequacy of the estimates is justified. Limit the application of the methodology – the presence of active M&A market. The article presents the results of a comparative analysis of the practical features of 4 approaches to the valuation of the company: comparative, cost, revenue and based on neural networks. The obtained results can be used in corporate governance to prepare solutions for transactions in the M&A market.

Keywords: corporate governance, company valuation, M&A market, neural network, comparative analysis

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For citation: Evsyukov V. V., Komov V. A. Comparative analysis of approaches to valuation of companies in mergers and acquisitions // Corporate governance and innovative economic development of the North: Bulletin of the Research Center of Corporate Law, Management and Venture Capital of Syktyvkar State University. 2019. No. 2. Р. 67–76. DOI: 10.34130/2070-4992-2019-2-67-76.