Question

Hyundai, the fourth largest vehicle manufacturer based in South Korea is considering the acquisition of a private target in The Philippines to produce cars and market them throughout the country, where demand for cars has increased substantially in recent years. Assume that the share prices of most companies in the Philippines rose substantially just prior to Hyundai’s assessment of the target. If Hyundai acquires a private target in The Philippines, will it be able to avoid the impact of the high share prices on business valuations in The Philippines?

Answer 1

In the given question, the company Hyundai wants to meet the increased demand in cars by acquiring a private target in Philippines. The share price of most of the companies have increased. In such a situation, the share price of the private target will also increase. The impact of the high share price can be seen on the business valuation. Then the price at which Hyundai can acquire the private target of Philippines will rise substantiall. The effect of share price on business valuation cannot be avoided. There will be a direct impact. The private target can show its high valuation in the market and ask for a higher price in order to be acquired.