The study on real options valuation method of logistics enterprises' Mergers and acquisitions

In recent years, logistics enterprises in China have developed rapidly though Mergers and Acquisitions (M & A) which can bring positive effects, integrate resources of logistics, improve capabilities and increase market competitiveness. Mergers and Acquisitions (M & A), as the core of capital management, has become an important way for logistics enterprises to achieve rapid development, expand scale and gain market power. When logistics enterprises make good use of Mergers and Acquisitions, they could achieve a leap in growth. However, M & A deal is often very complex with a key success factor — the transaction price. Traditional Discounted Cash Flow Valuation is often used in practice, which tends to ignore the flexibility of business operations in assessing the value of target logistics enterprises. Real Option Theory, on the other hand, is an effective valuation method to make flexible investment decisions. Real Option Theory can be applied to investment decisions of logistics enterprises that have flexible or strategic growth in order to explore various investment opportunities under uncertainty as well as to bring new value, avoid value underestimation and reduce decision-making errors.