AN ANALYTICAL STUDY ON BUSINESS VALUATION METHODS IN MERGERS & ACQUISITIONS(M&AS)

Abstract

This paper provides an analytical study of Business Valuation Methods in Mergers & Acquisitions (M&A), particularly focusing on the Discounted Cash Flow (DCF) and Comparable Companies (CC) methodologies, and their combination. The research examines a dataset of M&As involving Indian businesses from 2005 to 2024. The results indicate that the combined DCF and CC methodology offers a broader range of post-deal performance, yielding positive results 100% of the time on the M&A Price Vs 52 Week High Price metric when compared to using either DCF or CC alone. The performance varies significantly across industries and is influenced by the SENSEX index level at the time of the M&A, suggesting the role of broader macro-economic factors. This study reaffirms that valuation methodologies, while crucial for potential performance analysis, are tools that should be adapted and utilized considering the specific context of the M&A and the macro-environment in which the firms operate.