A valuation approach is the methodology used to determine the fair market value of a business. Different methods for Valuation are Cost of Capital Approach, Adjusted Present Value Approach and Economic Value Added Approach.
For pricing of the firm we have Trading comparable and Transaction comparable approaches which are variants of Relative Valuation Method
When two or more companies merge, they create a new entity that often benefits from both merged parts (e.g. cost position, broader product/services offering, know-how, market access etc.) e.g. Disney and Pixar, Exxon and Mobile
Acquisition is sometimes seen as an extreme case of a merger where one company takes over another company incorporating it into its own entity e.g. Microsoft and Skype, Dell and EMC
A leveraged buyout (LBO) is the acquisition of a company in which the buyer puts up only a small amount of money and borrows the rest. The buyer’s own equity thus “leverages” a lot more money from others. The buyer can achieve this desirable result because the targeted acquisition is profitable and throws off ample cash used to repay the debt. Such transactions are also known as “bootstraps” or HLTs, i.e., “highly leveraged transactions.” Since they first appeared in the 1960s and took hold in the 1970s, LBOs have had mixed reviews from business people and other observers. Some see them as tools to streamline corporate structures, to rationalize meaninglessly diversified companies, and to reward neglected stockholders. Others see the LBO as a destructive force destroying economic and social values, the activity motivated by greed-driven predation.
LBOs are typically used for three purposes, each in the category of corporate acquisitions generally. These are 1) taking a public company private, 2) financing spin-offs, and 3) carrying out private property transfers frequently related to ownership changes in small business.
Are you planning to raise funds by selling the stocks of your company?
You want to invest in the stocks?
You are planning to acquire some firm?
For all of these you need to know the value of the firm, let us explore the methods to value the firm and equity