Application of real options model in multiple-stage acquisition strategies

Abstract

This paper aims to examine the criteria for strategy formulation in the consideration of potential acquisition values in a multiple-stage acquisition process. This paper uses a case study to attempt to construct the valuation of a reasonable acquisition value based on the real options method. The implied potential value measured in different stages of horizontal acquisitions is referred to as the basis to decide the best strategies and the choice of exits, and to determine the optimal acquisition price in negotiations. Comparing with the traditional valuation methods, it demonstrates more flexibility in the negotiation mechanism in the multiple-stage acquisition and that can protect the optimal price for both parties.