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Dear sir,
There are two questions related to business valuation Hav Co in jun13 and Sigra Co dec12 respectively.In Hav co part b when examiner calculate primium for seconds option where there is cash plus share are offered he calculates share price for strand co and then calculates the premium fair enough but in Sigra Co almost same happens but here the eaminer first find the value of combined company and than calculate price/share based on the merged company an than calculate the premium
Why is he anwering the very similar requirement with 2 different approaches its making me confused as which to follow in exam please clarify it for me which to adopt or where i am not picking the examiner.
Kind Regards.The examiner is a bit confusing.
It depends whether we are looking at it from the point of view of the acquiring company, or from the points of view of the shareholders of the company being acquired.
The acquiring company will be in a position to estimate the new value of the combined company and therefore the most they can afford to pay.
The shareholders of the company will not be able to estimate it and will therefore base their decision of the current value of the shares they are being given.If it is not clear from the question which viewpoint to take, then state your assumption and you will still get the marks.
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