merged with another but it must be satisfied with the value of the shares its

Merged with another but it must be satisfied with the

This preview shows page 160 - 162 out of 295 pages.

merged with another but it must be satisfied with the value of the shares, it's shareholders should get in the form of shares of the merging company for effecting merger. Such satisfaction is necessary to weigh the over-valuation of shares of acquirer and/or under valuation of shares of the acquired or vice-versa. Therefore, to enable shareholders of both the companies, to take decision in favour of amalgamation; valuation of shares is needed and once they are satisfied and have approved it with requisite majority, the court approves the same while sanctioning their scheme of amalgamation, because it is the interest of shareholders which will suffer in the event of wrong valuation. The value of a firm can be directly related to the decisions it makes — on which project it undertakes, on how it finances them and on its dividend policy. Understanding this relationship is the key to making value-increasing decisions and sensible financial restructuring. Valuation is the central focus in -fundamental analysis. The underlying theme in fundamental analysis is that the true value of the firm can be related to its
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financial characteristics — its growth prospects, risk profile and cash flows. A deviation from this value is a sign that a stock is under or over valued. Valuation plays a significant part in acquisitions Valuation of the target in an acquisition is an important part of the process of determining the consideration to be offered to the target shareholders. The value that the bidder places on the target sets the maximum or 'walk away' price that the bidder can afford to offer the target shareholders. The value of the target from the bidders point of view is the sum of the pre-bid stand alone value of the target. On the other hand, target companies may be unduly optimistic in estimating value, especially in hostile takeovers, as their attempt is to convince the shareholders that the offer price is too low. Valuation of shares also depends on who the buyer is. A low-profile company can extract high price if a big company like Microsoft eyes the new profile company as a takeover proposition. Factors influencing valuation Many factors have to be assessed to determine fair valuation for an industry, a sector, or a company. The key to valuation is finding a common ground between all of the companies for the purpose of a fair evaluation. Determining the value of a business is a complicated and intricate process. Valuing a business requires the determination of its future earnings potential, the risks inherent in those future earnings, Strictly speaking, a company's fair market value is the price at which the business would change hands between a willing buyer and a willing seller when neither are under any compulsion to buy or sell, and both parties have knowledge of relevant facts. The question that then arises is "How do buyers and sellers arrive at this value?" Arriving at the transaction price requires that a value be placed on the company for sale. The process of arriving at this value should include a
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