Applying the real options approach to an optimal multi-stage acquisition model

This study introduces the real options approach to construct the mathematical decision-making model of multi-stage acquisitions so as to evaluate the optimal strategy for the stages of negotiating, acquiring, and exiting. This work assesses either waiting to acquire value and/or potential exit value or true value at each stage and provides to search the stable equilibrium solution which is recognized by acquiring and acquired firms. This investigation also considers the bidding strategy in the stage of negotiating. Furthermore, the proposed model of acquiring price which is decided by a mix-strategy for running the equilibrium expected firm value is also a main focus in this paper.