Valuation of mergers and acquisitions: the case study of a Greek listed company

Abstract

The purpose of this research is to estimate the value of two listed companies in the process of their merger and the investigation of the financial synergy value; a comparison of the results to those of the published valuation is also presented. The valuation method applied is the discounted free cash flow to the firm. The method's inputs were decided by comparing the firms' financial ratios to the industry's for a limited period of time (time series and cross-sectional analysis), as part of the strategic analysis. The models applied in the strategic analysis are the Boston Consulting Group Matrix and the Strategic Group Map Analysis. For the calculation of the discount rate, the capital asset pricing model is used. A combination of both the capital asset pricing model and the discounted cash flow to the firm is used in the valuation of synergy. Finally, the results reveal that both firms are divesting wealth instead of creating it. We also demonstrate that synergy value does exist in the merger; however the fiscal and financial conditions under which the Greek aquaculture firms operate may prevent them from surviving the competition in the long run.