CONCEPTS AND METHODOLOGIES Analysis of Business Transactions / Deals Valuation plays a very big role when analyzing potential deals. Potential acquirers use relevant valuation techniques (whichever is applicable) to estimate value of target firms they are planning to purchase and understand the synergies they can take advantage from the purchase. They also use valuation techniques in the negotiation process to set the deal price. Business deals include the following corporate events: « Acquisition - An acquisition usually has two parties: the buying firm and the selling firm. The buying firm needs to determine the fair value of the target company prior to offering a bid price. On the other hand, the selling firm (or sometimes, the target company) should have a sense of its firm value to gauge reasonableness of bid offers. Selling firms use this information to guide which bid offers to accept or reject. On the downside, bias may be 2 significant concern in acquisition analyses. Target firms may show very optimistic projections to push the price higher or pressure may exist to make resulting valuation analysis favorable if target firm is certain to be purchased as a result of strategic decision. Merger — General term which describes the transaction wherein two companies had their assets combined to form a wholly new entity. Divestiture — Sale of a major component or segment of a business (e.g. brand or product line) to another company. * Spin-off — Separating a segment or component business and transforming this into a separate Jegal entity. e Leveraged buyout — Acquisition of another business by using significant debt which uses the acquired business as a collateral. Valuation in deals analysis considers two important, unique factors: synergy and control. * Synergy — potential increase in firm value that can be generated once two firms merge with each other. Synergy assumes that the combined value of two firms will be greater than the sum of separate firms. Synergy can be attributable to more efficient