Based on the financial situation of similar listed companies, the method of determining corporate value is called “market approach”. Why is this method useful for M & A? M & A is now recognized as one of means for efficiently developing enterprises in the modern economy. And it is also a means for overcoming the situation where business is not good for the company that sells the company, that is, the company on the seller side. However, there are various points to keep in mind when doing M & A. One of them is that when conducting M & A it is necessary to decide the appropriate value for the company where the acquisition is made. It is essential to consider this point. This is because the value of a company is determined as a result of negotiations between both buyers and sellers, but sometimes the process of enterprise value determination becomes too subjective and arbitrariness or the like may enter. The “market approach” approach helps to avoid it. Market approach is to decide the appropriate value of a company from the financial situation of listed companies that are similar to the companies subject to acquisition.
Criteria for highly objective corporate value
Because the market approach method considers the financial situation of third party companies unrelated to M & A, it is considered to be highly objective as a standard. Therefore, this method may be used to judge the corporate value of small and medium enterprises, not limited to companies that are selling the company. However, this technique is not always effective at all times. Because the approach of market approach can maintain a high standard from the viewpoint of objectivity, in part because it is sometimes difficult to find listed companies that do exactly the same business in the first place. Some companies certainly do similar projects in some aspects, but when analyzing from other directions there are many cases where there are slight differences in the business contents. On the contrary, in an effort to calculate a higher corporate value, there is also the danger that selected listed companies to be compared will be chosen while subjective judgment is being made in an effort to calculate the corporate value cheaply. Therefore, when using the market approach as a judgment of corporate value, it is necessary to try to keep similarity with listed companies that are compared with companies that are subject to acquisition as much as possible while paying attention so that subjective evaluation will not be entered .