At present, the internationally accepted evaluation methods are mainly divided into three categories: income method, cost method and market method. ?

1. The income method determines the value of the appraised object by capitalizing or discounting the expected income of the appraised enterprise to a specific date. Its theoretical basis is the discount theory in economic principles, that is, the value of an asset is the present value of the future income that can be obtained by using it, and its discount rate reflects the return rate of the risk of investing in the asset and obtaining income.

the main methods of income method include discounted cash flow method (DCF), internal rate of return method (IRR), CAPM model and EVA valuation method. ?

the income method focuses on the development of the enterprise itself. Income method pays attention to the profit potential of enterprises and considers the time value of future income, which is a method based on the present and looking to the future. Therefore, it is more suitable for enterprises in growth or maturity with stable and lasting income to adopt income method.

Advantages: It can fully consider all kinds of depreciation factors of assets, and because the value of assets is measured by future earnings, the result is more acceptable to investors.

Disadvantages: Because the predicted cash flow of most equipment is brought by the whole assets including houses, machinery and equipment, current assets, land and intangible assets, it is difficult to quantify it to a single machine and equipment. Predicting future earnings and determining the discount rate are subjective factors, which directly affect the accuracy and credibility of the evaluation results.

2. The cost method is based on the balance sheet of the target enterprise to determine the value of the appraised object by reasonably evaluating the asset values and liabilities of the enterprise. The theoretical basis is that the price paid by any rational person for an asset will not be higher than the price of replacing or buying a substitute with the same use. The main method is the replacement cost (cost addition) method. ?

the cost rule is to consider the existing assets and liabilities of an enterprise and truly evaluate the current value of the enterprise. Therefore, when a holding enterprise that only invests or only owns real estate is involved, and the evaluation premise of the evaluated enterprise is non-sustainable, it is appropriate to use the cost method for evaluation.

advantages: it is simple and easy to evaluate the assets of the enterprise one by one and then add them to get the enterprise value.

Disadvantages:

First, it blurs the difference between individual assets and overall assets. All overall assets have comprehensive profitability, and the overall assets are composed of individual assets, but they are not simply the sum of individual assets.

All kinds of individual assets in an enterprise need to invest a lot of human assets and a standardized organizational structure to carry out normal production and operation. Obviously, the cost addition method cannot reflect the human assets and organizational value of these individual assets.

therefore, the cost method is used to determine the enterprise evaluation value, which only includes the value of tangible assets and tangible intangible assets, and cannot reflect the intangible assets as intangible assets-goodwill.

second, it can't fully reflect the evaluation function of enterprise value evaluation. The enterprise value could have been evaluated by forecasting the future operation and profitability of the enterprise.

The cost method only evaluates the value of an enterprise from the perspective of asset purchase and construction, without considering the operating efficiency and operating performance of the enterprise. In this case, if the original investment of the same type of enterprise in the same period is the same, the evaluation value will tend to be consistent regardless of its benefits. This result is contrary to the objective laws of the market economy.

3. The market method is to compare the appraisal object with the equity assets such as reference enterprises or enterprises with trading cases in the market to determine the value of the appraisal object. Its application is based on the assumption that similar assets will have similar prices in a complete market. The commonly used methods in market law are reference enterprise comparison method, merger case comparison method and price-earnings ratio method. ?

the market method is different from the income method and the cost method, which shifts the evaluation focus from the enterprise itself to the industry and completes the transformation of the evaluation method from the inside out. The market method is simpler and easier to understand than the other two methods. Its essence lies in seeking suitable benchmarks for horizontal comparison. In the case that the target enterprise belongs to the development potential type and the future income is uncertain, the application advantage of market method is prominent.

the advantage is that it is easier to quantify the value after being determined by comparable enterprises.

Disadvantages: In the case that the property rights market is underdeveloped and it is difficult to collect business transaction cases, it is difficult to choose comparable enterprises. Even if very similar enterprises are selected, their development background and internal quality are quite different due to the diversity of the market.

this method lacks substantial theoretical basis for support, which is the limitation of using market method to determine the final evaluation value of the target enterprise. As a simple computing technology, it only complements the other two methods.

the significance of enterprise value evaluation

1. From the perspective of M&A procedures, it can be generally divided into three stages: target selection and evaluation, preparation plan, separation or agreement M&A implementation. Among them, target selection and evaluation is the primary and basic link of M&A activities, and the core content of target evaluation is value evaluation, which is a prerequisite for determining whether M&A activities are feasible.

2. From the perspective of M&A motives, M&A enterprises generally aim to achieve the synergy of management, operation and finance and achieve strategic objectives, but in theory, as long as the price is reasonable, the transaction can be concluded, so the value evaluation of the target by both parties is the basis for deciding whether to conclude the transaction or not, and it is also the focus of negotiations.

3. From the investor's point of view, the transaction value of M&A enterprises is beneficial to one's own side. However, due to insufficient information or subjective understanding of both investors.

therefore, in the process of M&A, it is necessary to evaluate the value of the M&A enterprise itself, the target enterprise and the joint enterprise after M&A. The three are independent, interrelated and indispensable, and the isomorphism of * * * becomes the enterprise value evaluation in M&A, which plays a vital role in the success of M&A decision.