John, let me answer your questions in order:
1.Depending on whether you subscribe to the efficient market theory, this could be a big assumption to make. In the case of ASND, I do not think the market has correctly valued ASND in the past or currently. So, based on your model would you have to calculate your own valuation of the company, and use that number?
Yes, but this would be the valuation from the point of view of the seller (ASND), not the buyer (LU). The problem is how to value a growth company. I've yet to see any good mathematical/financial model for doin so.
2. So, what about non-synergistic considerations? For instance, Lucent, LU, may be interested in obtaining ASND in large part to prevent its competitors from doing the same, and thereby gaining a stranglehold against its core business.
This question is a little easier to answer. You do with/without analysis, and ascribe all of the difference to the acquired company. Thus, if you expect that LU would lose market share for a certain product without the acquisition of ASND, then you assign the amount of market share retained (and the cash flow that it generates) as an asset of ASND.
3. Based on the model that you summarized, is there really anyway for a typical investor to calculate a valuation, for say ASND, given that we do not have access to ASND's and a potential acquirer's synergistic calculations?
I don't think so, because much of the value of the acquired company depends on the acquirer's plans. So value, like beauty, is in the eyes of the beholder.
Regards,
Paul |
