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Sir,
1) In the topic of m&a, in a newly formed company post acquisition, which value should we use to compute the share price? Value of company, which includes market value of liabilities of both companies, or the combined value of equity only? (And any PV of synergies)2) in a bid offer, and question require us to compute percentage gain for both acquirer and acquiree, which share price should we use to compare the percentage for :-
a) cash offer only- for acquiree, is it the old share price of target company?
b) share exchange- the share price of the newly combined company?
c) cash and share offer – same as (b)?1 It depends whether the question asks you to use FCF or FCFE. Usually it will be FCF.
2 As far as the acquiree is concerned you would normally use the current share price of the target and of the acquiring company (because the shareholders would not be in a position to estimate what the new share price of the acquiring company will be – they will not have the information).
As far as the acquiring company is concerned then since they are able to estimate the market value of the combing company then more likely you will use that.1. If the question asks us to use FCF, and using the WACC, which would result in value of firm=value of equity + value of debt, can we use value of firm to compute share price by dividing V with number of shares issued?
Because, from my understanding, share price is derived from value of equity only.
Thanks in advanced
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