Conceptual Model for Evaluating Mid-Market M&A Transactions Using Risk-Adjusted Discounted Cash Flow Analysis

• Author(s): Aminat Opeyemi Shobande; Deborah Atere; Ibukunoluwa Hannah Toluwase
• Paper ID: 1711157
• Page: 241-254
• Published Date: 31-01-2019
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 2 Issue 7 January-2019

Abstract

Mid-market mergers and acquisitions (M&A) represent a critical segment of corporate finance, where firms seek strategic growth and value creation through consolidation. However, these transactions are often characterized by heightened uncertainty, asymmetric information, and varying capital structures that complicate valuation. This review develops a conceptual model for evaluating mid-market M&A transactions using a risk-adjusted discounted cash flow (DCF) approach. Unlike conventional DCF analysis, which assumes relatively stable cash flow projections and discount rates, the proposed model incorporates transaction-specific risks such as integration complexity, financing constraints, and market volatility. The framework synthesizes insights from corporate finance theory, behavioral finance, and risk management, emphasizing the need for adaptive discount rates that reflect both systematic and idiosyncratic risks. By aligning risk-adjusted returns with transaction structure and industry benchmarks, the model enhances decision-making for investors, advisors, and corporate managers. Additionally, it addresses limitations of traditional valuation methods by integrating scenario analysis, sensitivity testing, and probabilistic modeling. This paper contributes to the literature on M&A valuation by providing a structured lens for understanding mid-market transactions, where standard approaches often underperform due to scale-specific risks. Ultimately, the model offers a practical foundation for improving valuation accuracy and deal outcomes in this dynamic market segment.

Keywords

Mid-Market Mergers and Acquisitions, Risk-Adjusted Discounted Cash Flow, Transaction Valuation Models, Corporate Finance Strategy, Integration and Synergy Risks, Scenario and Sensitivity Analysis.

Citations

IRE Journals:
Aminat Opeyemi Shobande, Deborah Atere, Ibukunoluwa Hannah Toluwase "Conceptual Model for Evaluating Mid-Market M&A Transactions Using Risk-Adjusted Discounted Cash Flow Analysis" Iconic Research And Engineering Journals Volume 2 Issue 7 2019 Page 241-254

IEEE:
Aminat Opeyemi Shobande, Deborah Atere, Ibukunoluwa Hannah Toluwase "Conceptual Model for Evaluating Mid-Market M&A Transactions Using Risk-Adjusted Discounted Cash Flow Analysis" Iconic Research And Engineering Journals, 2(7)