“Valuation is influenced not only by the motive of the acquirer company but also that of target company's objectives.” Analyse the statement in brief.

Merger/Amalgamation/Takeover is backed by the aspect of valuation. Appropriate method of valuation of a business depends to a great extent on the acquisition motives. The reasons for valuation could be to achieve the objectives of the top management i.e. either purely financial aspects relating to taxation, assets stripping, financial restructuring or business related such as expansion or diversification. However, behavioural reasons have more to do than personal ambitions or objectives of the top management. Normally, top management has desire to expand and diversify the needs to be chosen between Make or Buy decision. A criterion adopted to arrive at a decision is to evaluate present value of the differential cash flows. Acquisitions are not only normally market driven but also influenced by non-financial considerations. Thus the value of a target gets affected not only by the motive of the acquirer, but also by the target company's objectives. The price could be affected by the motives of the other bidders as well.