Abstract
Nowadays, the activities of merger and acquisitions become increasingly frequent, and a successful M&A need to be established on the base of reasonable assessment to the target company's value. Considering the value of target company in different situations is required in decision making in M&As because of the uncertainty that the value of target company often have. The theory of real options provides a good basis for investment decisions under uncertainty, while the feature of specific investment activities is needed to take into consider. Therefore, it is necessary to improve the option pricing method, such as binary tree model, under the real feature of M&As activities, and analyses the change of the value of target company over time and the corresponding tactics that the acquiring corporation should take.
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