Page 50 - FINAL CFA II SLIDES JUNE 2019 DAY 6

READING 25: MERGERS AND ACQUISITIONS
Step 4: Estimate a takeover premium.
MODULE 25.3: TARGET COMPANY VALUATION

Step 5: Calculate the estimated takeover price for the target as the sum of estimated
stock value based on comparables and the takeover premium.

Estimated takeover price for AGSI:
= $46.62 × 1.19 = $55.48

ESTIMATING THE VALUE OF A MERGER TARGET USING COMPARABLE TRANSACTION ANALYSIS

Step 1: Identify a set of recent takeover transactions (same industry as the target and have a similar capital structure);
Step 2: Calculate various relative value measures based on completed M/A deal prices for the companies in the sample –similar to before!
Step 3: Calculate descriptive statistics for the relative value metrics and apply those measures to the target firm.