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Calculating value of company

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Calculating value of company

  • This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 14, 2016 at 8:20 pm #322943
    Drummer Bhoy
    Member
    • Topics: 6
    • Replies: 4
    • ☆

    Dear John,

    When provided with the following details, which is the correct method of calculating post aquisition company value? :

    Details
    -Most recent profit after tax for aquirer and aquirer on their own, pre aquisition
    -P/E ratio after aquisition
    -Synergy p.a. created from aquisition

    I am uncertain if I should use bootstrapping or add synergy onto individual company values pre aquisition

    My uncertainty arises because the P/E ratio of joint company post aquisition is LESS than the P/E ratio of the acquiree company on its own. Does it have a bearing on which method I should use the fact that it is less?

    Kind regards

    June 15, 2016 at 5:42 am #322972
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    You should apply the PE of the joint company to the total earnings of the two companies together with the synergy benefits.

    June 15, 2016 at 9:12 am #323007
    Drummer Bhoy
    Member
    • Topics: 6
    • Replies: 4
    • ☆

    Thanks John. Much appreciated.

    June 15, 2016 at 5:01 pm #323059
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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