How a computerized corporate planning model of a multinational firm contributed to evaluate an acquisition

Abstract

To quantify the take-over value of a business firm, classical cash flow projection techniques frequently fail because the business is evaluated as an independent alternative. In this paper we show how a computer-based corporate planning model may be used to evaluate a candidate for take-over by an acquiring multinational firm.

The main part of the corporate planning system was an operational optimization system, searching the optimal plan of allocation of product markets to companies. In the introductory stage of the modelbuilding the optimization was based on a heuristic algorithm. During the evaluation of the synergistic advantages of the take-over of a small competitor, the heuristic was compared with a more sophisticated mixed integer linear programming model. The results of this comparison are reported.