One approach to valuing target companies for a takeover bid is to use a multiple of the target company's earnings per share and P/E ratio.

Question

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Using a multiple of the target company's earnings per share and P/E ratio is a commonly used method of valuation for takeover bids. It involves calculating the target company's earnings per share and then applying a multiple to that number based on factors such as industry norms and the company's growth potential. The resulting figure is then compared to the acquiring company's P/E ratio to determine the potential value of the acquisition.

One Approach to Valuing Target Companies for a Takeover Bid