“The key to valuation is finding a common ground between all the companies for the purpose of a fair evaluation.” Comment with reference to factors influencing valuation.

Determining the value of a business is a complicated and intrinsic process. Valuing a business requires the determination of its future earnings potential, the risks inherent in those future earnings. Strictly speaking, a company's fair market value is the price at which the business would change hands between a willing buyer and willing seller when neither is under any compulsion to buy or sell and both parties have knowledge of relevant facts. The other salient factors influencing valuation are: The stock exchange price of the shares of the two companies before the commencement of negotiations or the announcement of the bid. Dividends paid on the shares. Relative growth prospects of the two companies. In case of equity shares, the relative gearing of the shares of the two companies. Debenture stock to the amount of issued ordinary share capital. Net assets of the two companies. Voting strength in the merged enterprise of the shareholders of the two companies. Past history of the prices of shares of the two companies.