First step is to compute the Net asset value of the absorbed Company Total assets

Minus
Provisions
Depreceation of b
Depreceation of e
Loans
the net asset value should equal Equity of the same company 3750

The second step is to compute the new shares in the absorbing company

Parity: 2 shares of the absorbing company equal 1 share of the absorbed company

the share capital of the absorbed company 20000 in which

the new shares in the absorbing company 8000 *2

The contribution will be booked at the accounting price 3750

Intake analysis
the absorbing company capital 2250
Minority share holders 1500

The third step is to compute the Merger premium/ or the additional paid in capital
THE NOMINAL VALUE OF THOSE SHARES 800
Premium on new shares 700
the nominalm value of the old shares 1200
Unrealized gain of the merger 1050

The additionnal paid in capital 1750 Premium on

Accounting entry

Transit accouint company a 3750

share capital
A2dditionnal paid in capital
participations investment

Total assets 8890

Provisions
Depreceation of b
Depreceation of e
Loans
Transit accouint company a
 k EURO

epreceation of b
epreceation of e

The absorbing company ows 60% of the absorbed company

12000 belong to the absorbing company

16000

The contribution will be booked

THE NOMINAL VALUE OF
the nominalm value of
The additionnal paid

Premium on new shares +Unrealized gain of the merger

800
1750
1200

140
 800
900
3300
3750
 The Npv of of merger = Vab-Va-price paid for B

Target firm payout >= x*New firm value

sachant que x new shares issued /( old shares +New shares issued

2nd solution to compute the additional paid in capital

e contribution will be booked at the accounting price 3750

THE NOMINAL VALUE OF NEW SHARES 800
the nominalm value of the old shares 1200
The additionnal paid in capital 1750
 Net income 40 interes expen 5 iunterest inc

Net interest 1.65

unlevered net income 41.65
Nopat 44.65
Fcf 28.65
2 tax rate 0.45 change in deferred tax 3 depreceation 10
change in working capital 6 capex 20
 number price
the Bid 1,000,000 18
real value 1,000,000 15
Big company stock 10,000,000 40
the merger will reduce costs of 2,000,000 per year
dicount rate 0.1

Synergie 20,000,000 1

Little company gains 3,000,000 2

Big company gains 17,000,000

the value of the big company after the merger 417,000,000 3

Formulas
the target shareholder's gain Premium = Price paid - pre merger value of the company

Acquirer's gain Synergie-Premium

post merger Value of the acquirer Va=pre merger value + pre merger value of the target +synergie-price pa
ue of the company

e of the target +synergie-price paid