Track: Financial Engineering

Abstract

New Share Acquisition in the form of equity investment is a corporate action that enables a company to grow inorganically due to new capital used for expansion and the investor/acquirer market position & technology. Besides, consolidating two entities generally will create more value from the investor perspective than two separate entities due to the synergy effect. This research will develop a hypothetical case study of a new share acquisition done by a Telco company in Indonesia. The model and concept can be applied in real acquisition situations. Monte Carlo simulation will be used to analyze the acquisition cash flow and determine the effect of synergies based on the revenue increase, market positioning, and cost-saving in the financial acquisition model. Those synergies effect will treated as the variable of the Monte Carlo Simulation. The study aims to minimize the risk of failed M&A by determining if the result of the consolidated acquisition model projection will achieve the pre-determined acquisition success factor metric such as Investment Internal Rate of Return (IRR), and the acquirer’s potential market capitalization/Net Present Value (NPV) after acquisition. This simulation produces the probability of achieving those targets and helps the investor manage the risk of unsuccessful acquisitions.