Transaction prices of overseas mergers and acquisitions with a redemption provision
LONG Dawei1,3, HUANG Hongxuan2, WANG Mengyue2, YANG Yongsen3
1. School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100049, China;
2. Department of Industrial Engineering, Tsinghua University, Beijing 100084, China;
3. Headquarters in Beijing, Chengzhi Shareholding Corporation, Ltd., Beijing 100084, China
Abstract：Chinese enterprises are competing in the global business through overseas mergers and acquisitions. This paper studies a mechanism for asset pricing and transaction price formation which includes fundamental concerns and key phases related to redemption provisions. The process assesses the target enterprise value by the real option method, determines the transaction price interval, computes the nominal values via the utility maximization or bargaining models, and updates the asset purchasing price for the transaction with repurchase clauses. The present value and utility equivalency strategies are used to predict the transaction price formation. The effect of the redemption provision is described by a probability which is related to the transaction price. A case study shows the feasibility of this method for evaluating overseas mergers and acquisitions for an A-share company purchasing an overseas bioenergy life science company with the redemption provision. This is a comprehensive, integrated approach for evaluating the value of a firm and determining the purchase price through the bargaining between the buyer and the seller.
龙大伟, 黄红选, 王梦月, 杨永森. 带回购条款的境外企业并购交易价格形成机制[J]. 清华大学学报（自然科学版）, 2016, 56(8): 851-859.
LONG Dawei, HUANG Hongxuan, WANG Mengyue, YANG Yongsen. Transaction prices of overseas mergers and acquisitions with a redemption provision. Journal of Tsinghua University(Science and Technology), 2016, 56(8): 851-859.
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2016, Vol. 56 
