Академический Документы
Профессиональный Документы
Культура Документы
METHODS OF VALUATION
FOR MERGERS AND
ACQUISITIONS
SYNDICATE 10:
Rani Fennesia 29116007
Lulu Nur Fitriani 29116367
Eugenia Andrea Dennisa 29116492
Rendy Mangunsong 29116550
DISCOUNTED CASH FLOW (DCF)
The discounted-cash-flow approach in an M&A setting attempts to determine the
value of the company by computing the present value of Cash Flows over the
life of the company
Discount Rate
WACC = Wd Kd (1-t) + We Ke
THE M&A SETTING
First, we should recognize that there are two parties (sometimes more) in the
transaction: an acquirer (buyer or bidder) and a target firm (seller or acquired).
M & A are complex, involving many parties.
M&A nvolve many issues, coorporate governance, legal issue, regulatory approval.
Liquidation Value The sales of assets at a point in time. May be appropriate for
firms in financial distress, or its operating prospects are very cloudy
Market Value of Traded Securities Method is used to value the equity of the
firm as Stock price x Outstanding shares. It can also be used to value the
enterprise (V) by adding the MV of Debt (D) as the price of bond x outstanding
bonds.
SUMMARY COMMENTS
flawed methods to describe the past
The DCF method of valuation is superior
for company valuation in an M&A setting
MEASURED WITH ERROR
Not tied to historical accounting
values. uncertainty about the future
Focuses on cash flow, not profits.
Separates the investment and Therefore:
financing effects into discrete No valuation is right in any absolute
variables.
sense.
Recognizes the time value of money. use several scenarios / valuation
Allows private information or special methods
insights to be incorporated explicitly.
Allows expected operating strategy to Avoid analysis paralysis
be incorporated explicitly.
Embodies the operating costs and
benefits or intangible assets. Adapt to diversity
THANK YOU