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Hi Sir,
Is there an easy method of calculating Combined Asset beta and Euity Beta of combined Entity in an Aquisition.
the combined asset beta is simply the weighted average of the individual asset betas, weighted by the two market values. To get the equity beta you need to use the asset beta formula on the formula sheet and work backwards using the relevant gearing.
hello sir, for the two market values tat you mentioned, are you referring to both equity and debt of each company?
Eg: Acquirer’s mv of equity is 100 and mv of debt is 50, Total MV = 150
Acquiree’s mv of equity is 80 and mv of debt is 30, Total MV = 110So when calculate combined asset beta using weighting, We should use the Total MV of 150 and 110 which included the MV of the debt right?
Thanks
I think my answer to your previous question should explain that. If not then shout and I will try again 🙂
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