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The starting point for both the buyer and the seller in any merger or acquisition transaction is to determine the value of the target corporation. For the buyer (i.e., the acquiring corporation), this is a capital budgeting decision similar to any other investment decision, such as the decision to build a new plant. For the seller (i.e., either the target corporation in a sale of assets or its shareholders in a sale of stock), the determination of the target's value sets the reservation price at which the seller will stop holding and sell.

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