I'm doing a project for school that requires me to find an appropriate acquisition price for an established company (Google Inc). I tried to look up some guidelines but they all seem arbitrary and they contradict one another.
So any suggested prices with logic backing it up would be appreciated. Thanks :)
I always favor the KISS rule of doing things (Keep It Simple, Stupid). Anything beyond that will give you more headache than necessary.
Acquisition price = Shares of common stock outstanding x Fair market value of the stock.
Let's pretend you are going to acquire Google on 12/31/2008.
Get the common stock from the balance sheet: http://finance.yahoo.com/q/bs?s=GOOG&ann…
Common stock outstanding is 315,000 shares.
Get the fair market value from "Historical Prices": http://finance.yahoo.com/q/hp?s=GOOG
Set the date range to 12/31/2008 for the price. I’d use the closing price of $307.65.
Your acquisition price as of 12/31/2008 is $96,909,750
Unless your teacher is extremely nitpicky, this should be acceptable. I'm surprised Google has only 315,000 shares. I'd have guessed it was more.
For publicly traded companies, the stock price represents the (public) value of a company. However, a company is not always 100% public since the founders sometimes still have a considerable amount of shares. Hence, the question you are asking is can also be interpreted as "how much shares do I need to buy to claim majority ownership?" For academic purposes, I would suggest that a price, somewhat higher than the current stock price would suffice. In reality, this question of buying back shares is a bit more complicated since shareholders are able to vote for or against any such offer. And if you want to buy the whole company (including all equity from the founders, etc.), I guess sky is the limit.
go to yahoo finance. you want the market cap of a company. Google's is $173 Billion, which is their approximate market value