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What exactly do we have to calculate while estimating the value attributable to shareholders in context of acquirer and target companies?
What things do we have to keep in our minds while calculating that?I cannot give you one simple answer, because so much depends on the wording of the question and the information given in the question.
The total gain to shareholders of both companies is basically the difference between the new MV of the enlarged company and the sum of the current MV’s of the two individual companies.
How this gain is shared between the two groups of shareholders depends partly on how the target shareholders are being ‘paid’ (i.e. by cash or by shares in the enlarged company) but also by any requirement in the question that shareholders in the target company should receive a certain proportion of the gain.
Although I obviously assume that you have already watched all of my free lectures, you might find it useful to watch at least the first of the lectures linked from this page:
https://opentuition.com/acca/afm/afm-revision-lectures/ where I work through a few past exam questions.I’ve seen these videos as well, Sir!
I was having a trouble while solving a question when I typed this question out. However, I’ve got it sorted now.
Thanks for all the support you’ve provided till now!
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