International Journal of Applied Research
Vol. 2, Issue 6, Part A (2016)
A study on the significance of game theory in mergers & acquisitions pricing
Yonus Ahmad Dar and Dr. Yogesh Sharma
Mergers and acquisitions pricing is usually a difficult task as it is hard to estimate the price to be paid to purchase the target company. Corporate Finance valuations provide some support, however, Baker, Pan and Wurgler (2009) explain that psychological pricing factors exist and the final price can be quite different from the initial valuations.
This paper develops a two-person Merger & Acquisition model that intends to provide a simulation model in order to understand if the final negotiated price of an Merger & Acquisition transaction equals the mid-point of the acquirer’s offer and target’s bid price. Also, it reviews behavioral factors that can be part of Merger & Acquisition valuation and uses the model to simulate results to identify, in this case, if it is better for the acquirer to be risk taking or risk averse and for the target to be optimistic or pessimistic.
How to cite this article:
Yonus Ahmad Dar and Dr. Yogesh Sharma. A study on the significance of game theory in mergers & acquisitions pricing. International Journal of Applied Research. 2016; 2(6): 47-53.