Role of Valuation Model and Investment Banks in Mergers and Acquisitions

Running head: FINANCE
Finance
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1FINANCE
Table of Contents
Introduction:...............................................................................................................................2
Critical assessment of role of Valuation Model in framing seller price anticipation:...............2
Role of investment banks as the seller-side advisors or buyer-side advisors:...........................4
Conclusion:................................................................................................................................6
Reference List:...........................................................................................................................7

2FINANCE
Introduction:
In the process of merger and acquisition transaction, valuation represents the price
where a party to the transaction would pay for the other or the value that other party will give
up to make the transaction work. Valuation is made through the appraisal or in other words
the price of the organization’s stock given that it is a public company. However, at the end of
the valuation represents the number which is regularly negotiated. The current report is based
on critical evaluation of the role of valuation model at the time of framing the seller’s price
anticipation during mergers and acquisition. Additionally, the report will assess the role
played by the investment banks as the seller-side advisors and the buyer side advisors.
Critical assessment of role of Valuation Model in framing seller price anticipation:
Valuation is generally regarded as the blend of cash flow and the time value of
money. The value of the business is represented in two parts namely the profits and cash flow
generated by it. With several financial transactions, the time value of the money is one of the
factor. The valuation model takes into the account the amount the buyer is willing to pay and
the rate of interest they must discount the other company future cash flows (Cartwright and
Cooper 2014). Both the buyer and seller in the mergers and acquisition will possess different
perception regarding the worth of the target firm. It is the sellers that would tend to value the
firm at a price as high as possible where the buyer would try to obtain the at the lowest price
possible.
An important assertion can be bought forward by stating that the value of the
company is different from the price at which the firm is sold. Price represents the value at
which the willing purchaser and the seller is would agree to transact the deal. The value of the
company is perceived as the factor that impacts the price anticipation of the seller and buyer.