Reading 35: Mergers and Acquisitions - LOS l ～ Q1-3

答案和详解如下：

1.An analyst has identified three companies that have recently been taken over which they believe are comparable to a firm under evaluation as a takeover candidate. The relative value measures that they have selected are the price-to-earnings (P/E) and price-to-cash flow (P/CF), and the average values of these ratios are 11.2 and 8.6. The target firm has earnings per share of $2.45, and cash flow per share of $3.05. What is the estimated takeover price per share?

A)   $27.44.

B)   $26.84.

C)   $26.23.

D)   $27.66.

The correct answer was B)

The estimated value based upon P/E is $27.44 = (2.45 x 11.2).
The estimated value based upon P/CF is $26.23 = (3.05 x 8.6).
The estimated takeover price is the average of these two values: $26.84.

2.The quick change oil industry has been in a consolidation phase for about a decade, during which time the number of firms has shrunk from more than 50 to 15. An analyst is evaluating one of the remaining 15 firms as an acquisition target, and has come up with the following estimated acquisition prices:

Under the circumstances, which of these estimates is most likely to represent the ultimate acquisition cost, and why?

A)   Comparable company, because there is a large enough sample to ensure that valuation is correct, on average.

B)   Comparable transaction, because a sufficient number of transactions have occurred for intrinsic value to be relatively well-understood by market participants.

C)   Discounted cash flow (CF), because this considers expectations for the future as well as current data.

D)   Comparable company, because it is market based and provides a sound estimate of the fair stock price.

The correct answer was B)

Given the large number of acquisitions that have occurred in the industry, comparable transaction is likely to provide the most reliable estimate of the ultimate acquisition price. Comparable company analysis is certainly a viable method to estimate value, but still requires the analyst to estimate the takeover premium. This step is unnecessary when using the comparable transaction approach. Discounted CF valuation is also a viable method, but, in the presence of numerous comparable firms and transactions, logic suggests that the market-based valuation provided by the comparable transaction approach is more likely to produce superior results.

3．Which of the following orderings is the most accurate with regard to the steps involved in valuation using comparable transaction analysis?

A)   Identify recent takeovers of comparable companies, calculate relative value measures, apply relative value measures to target firm.

B)   Identify recent takeovers of comparable companies, calculate relative value measures, apply relative value measures to target firm, estimate takeover premium, estimate takeover price.

C)   Identify comparable companies, calculate relative value measures, apply relative value measures to target firm.

D)   Identify comparable companies, calculate relative value measures, apply relative value measures to target firm, estimate takeover premium, estimate takeover price.

The correct answer was A)

The correct ordering is: identify recent takeovers of comparable companies, calculate relative value measures, apply relative value measures to target firm. Identifying comparable companies is not correct by itself because they need to have been taken over. There is no need to estimate the takeover premium because this will be present in the relative value measures for firms that have been taken over.