Geobusiness Modelling in Determination of Coal Company Valuation for Merger and Acquisition Event
Ade Candra1, Hermanto Siregar2
1Ade Candra, School of Business, IPB University, Bogor, Indonesia.
2Hermanto Siregar, School of Business, IPB University, Bogor, Indonesia.
Manuscript received on 27 June 2019 | Revised Manuscript received on 10 July 2019 | Manuscript Published on 17 July 2019 | PP: 476-480 | Volume-8 Issue-2S July 2019 | Retrieval Number: B10710782S19/2019©BEIESP
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: M&A in coal industry are common corporate action conducted to expand the company businesses or to enlarge the company assets. We often find the candidates of transaction are using different valuation method to determine the Enterprise Value (EV). Therefore, deal may not be achieved. Some of the valuation methods do not show the roles of geologic factor and mining, yet these are the key factors for the M&A. This study aims to build mathematic model that accommodates different company’s valuation methods, thus allowing much proper determination of EV. In addition, the model may help understanding direct role of geologic factors and mining in determination of the company’s valuation. A statistic analysis is done first to validate the data that further used to build the model. The model will be formulated based on a linear regression utilizing EViews Software. Data are secondary that cover the last ten years of coal M&A transactions globally, limited to the well- published listed companies. Data covers the financial of company (EV, Revenue, GP, EBITDA, EBIT, FCF, Market Capitalization, P/E) and the commodity of transaction (Resources, Reserves, Grade, Recovery Factor, Commodity Price, etc.). These findings are expected from this study: geologic factor and mining can directly determine the EV; the valuation method mostly influenced the EV determination can be addressed. This study contributes simple and general geobusiness formulation to determine more accurate EV for both purchaser and seller. Hence, the negotiation of the M&A becomes easier since the deal opportunity for each party is higher.
Keywords: Merger and Acquisition; Enterprise Value; Geobusiness Modeling.
Scope of the Article: Knowledge Acquisition