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hi sir
i see a problem.
if the acquiring company is proposing to buy the target company with a share for share exchange, lets say 3 shares in its company for 2 shares in the target company, the three shares which the acquiring company is issuing what share price are they worth?Is it the share price in the total combined company as; sigra dec 2012, Nente June 2012
Or the share price in the acquiring company before acquisition. Hav co june 2013
Cuz i am seein in hav co, one acquiring company share for two target company shares, i was expecting to calculate combined company value and division by the new shares number but the examiner simply divided the current acquiring company share price by two, added in the part cash offer and calculated the percentage gain.
Or is both method acceptable??
The difference in these two answers is a bit confusing.
The real reason is that in one case you are looking to see what the target companies shareholders will accept (and they will not have information about what will happen after the takeover) whereas in the other case you are looking at what the acquirer would be prepared to pay (and they will have information about what will happen).
However, there is little doubt that both approaches would get the marks in the exam.
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