Mergers and acquisitions are often accompanied by uncertainty. The parties involved in an acquisition may have different financial capabilities. In such a situation, a buyer might be tempted to pay too much or not pay at all. A reputable firm can help companies make better decisions by accurately assessing the combined company’s value. Moreover, an accurate merger & acquisition valuation in Dubai can help minimize the risk of undervaluation.
They aim to expand the market size & value of the entities:
In contrast, cross-industry mergers involve entities in different industries. Such mergers aim to expand the market size and value of the combined entities. A wrong valuation estimate may affect these businesses negatively. Luckily, there are some highly accurate approaches to estimating entity value, but applying them in real-life transactions is complex. However, the benefits of merger and acquisition valuation are clear.
Helps determine a company’s value:
The most important benefit of merger and acquisition valuation is that it helps determine its value beyond the share price. The value of a firm is based on various factors, including the business’s size, its market position, and its profitability. In a typical merger or acquisition, a valuation report will help assess the value of a company in several ways.
Help to realize the benefits of economies of scale:
The ultimate goal of a merger or acquisition is to realize the benefits of economies of scale. When two companies combine, they become more productive and efficient and can compete more effectively in a market. These advantages can lead to increased profits for the merging company. This is especially true for firms that are looking for better opportunities. In addition, a merger or acquisition can increase competition and make a company more attractive to potential buyers.
When calculating the value of a company, valuation experts consider the economic outlook. While the value of an individual asset will always be dependent on its market value, the overall economic outlook will play a major role in determining the value of a given firm. This is because the current Gross Domestic Product, or GDP, is a major indicator of how optimistic people are about the economy. The Consumer Confidence Index will also be evaluated. A business valuation will also consider stock market trends and unemployment rates.