The Valuation Research of Steel Industry Enterprise in Mergers and Acquisitions

Mengyun XIANG


Iron and steel industry as a traditional pillar industry of the national economy in our country, is a basic industry in the national economy and people’s livelihood, in the modernization process of China’s industry has played an irreplaceable role. In the context of “cut overcapacity”, more merger, acquisition and reorganization will be happened in the area of iron and steel industry. In this process, industrial concentration situation will be changed, and more concentrated. As pricing is the core of the acquisition and m&a process, has attracted more and more attention. But the current m&a pricing method is not perfect, in order to solve that, real option method in the uncertain environment is proposed in this paper. There are fair value and the real option value in mergers and acquisitions, and we also put forward the synergistic effect coefficient to describe the synergistic effect in mergers and acquisitions. Considering variable operating cost of the iron & steel industry enterprises, assuming enterprise product price follows geometric Brownian motion, when the optimal production quantity in certain cases, the final profit streams must depend on the product price, so the profit streams also follows geometric Brownian motion. This paper puts forward the pricing method of iron and steel industry mergers and acquisitions.


Real options; Mergers and acquisitions (m&a); Dixit-Pyndick model; Synergistic effect

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