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M&A valuation for going concern: A case study using Samsung electronics’ adjusted EBITDA Multiple

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  • Jee Woung Hong
  • Jan Erik Meidell
  • Hyun-Jung Kim

Abstract

This study analyzes the limitations of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) Multiple from the perspective of the going concern principle. A new Adjusted EBITDA Multiple that complements the limitations of the EBITDA Multiple is generated and applied to real-world cases for comparison. EBITDA Multiple is used to assess if the target company is undervalued or overvalued; adjusted EBITDA Multiple is used to determine the time taken to recover the total acquisition cost of a company in an M&A transaction. Samsung Electronics, South Korea’s leading tech firm, is used as a case study to analyze financial information between 2017 and 2021. The result varied with the M&A decisions. Investment decisions in M&A are made considering the assets (debt + capital) to be assumed with the acquisition and additional investment costs for the target’s sustainable management. We propose a new valuation method for recovering M&A investment costs, considering the long-term sustainable growth of the acquired company.

Suggested Citation

  • Jee Woung Hong & Jan Erik Meidell & Hyun-Jung Kim, 2023. "M&A valuation for going concern: A case study using Samsung electronics’ adjusted EBITDA Multiple," Cogent Business & Management, Taylor & Francis Journals, vol. 10(2), pages 2209975-220, December.
    • Handle: RePEc:taf:oabmxx:v:10:y:2023:i:2:p:2209975
    DOI: 10.1080/23311975.2023.2209975
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