Fair Valuation of SABIC at the Time of Aramco’s Acquisition Announcement
Aramco’s announcement about acquiring SABIC was necessary for the company’s evaluation. The data about the last five years of business successes was influenced by the global economic crisis that halted the development in the industrial sector associated with the main SABIC products. This resulted in volatile statistics that were detrimental to future development predictions. The sales percentage growth in 2021 equals 49,5%, which signifies a rapid increase.
However, this resulted from the recovery after a global pandemic, when the sales dropped for two subsequent years. This tendency is further illustrated by other statistical units showing a halt or decrease in recent years and a growth perspective in 2021. Nurhayati et al. (2021) suggest that the assessment techniques should be modified according to the company’s response strategy. Nonetheless, Aramco’s representatives analyzed the prospects of future development and adjusted their predictions according to a larger period, thus making the evaluation more valid.
Potential Impact of Synergies with Aramco on SABIC’s Value
The value of SABIC will change due to the acquisition. While the company faced economic challenges during the pandemic, the recovery strategies proved successful, and 2021 was profitable. This tendency will be supported by more significant investments from Aramco, which can use SABIC’s resources and setups to increase the manufacturing scale and provide new supply and sales routes. The benefits of this deal will affect both companies, as SABIC was showing progress in 2021 and continued to grow before the acquisition process. Thus, the statistical analysis suggests an increase in future value as a result of this deal.
Concern arises regarding future attention to environmental problems. SABIC had a strong standpoint connected to the company’s sustainability, which made it preferable to customers concerned about the effects of the manufacturing process. If this policy shifts to a less green one, that might affect SABIC’s value and decrease the margin. However, this factor should be addressed by future market research and dealt with accordingly.
Reference
Nurhayati, I., Endri, E., Aminda, R.S., & Muniroh, L. (2021). Impact of COVID-19 on performance evaluation large market capitalization stocks and open innovation. Journal of Open Innovation: Technology, Market, and Complexity, 7(1). Web.