Corporate Valuation
Duration:
3 days
3 days
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
- General Introduction to Corporate Valuation
- Financial Statement Analysis
- Asset-Based Valuation Techniques
- Market-Based Valuation Methods
- Future Earnings and Cash Flow Valuation
- Models for Economic Value Added
The purpose of this practical three-day seminar is to give you a good understanding of state-of-the-art techniques for valuing corporations and strategic investments.
We start with a general introduction to corporate valuation where we discuss important objectives of corporate valuation, including private equity fundraising, mergers, acquisitions and new issues.
We then explain how the analysis of a company’s financial statements can serve as a good starting point for valuation. We look at how assets, liabilities and cash flows can be analyzed to gain insight in the company’s operating efficiency and financial strength. We also discuss how historic financials should be restated before they can be meaningfully used in valuation, and we explain how management can use “financial shenanigans” to flatter financial statements.
We then continue to present three alternative (or complementary) routes to corporate valuation.
In asset-based valuation we look at the company’s “hard assets”, represented by their book value or liquidation value and explain how it can be determined whether a company is over- or undervalued by the market.
We then look at market-based valuation techniques that focus on the market price for similar businesses at a given point in time. Here, we explain how to assess the relative value of corporations by comparing their P/E ratio, PEG, comparable sales, gross revenues and other variables. We also explain how to compare corporate valuations on a risk-adjusted basis.
Further, we explain how corporations can be valued using models based upon projections of earnings and cash flows. We look “dividend discount models” as well as “free cash flow” models, where future cash flows and enterprise value are modelled on more explicit assumptions about firms’ “value drivers”.
Finally, we explain and demonstrate alternative measures of residual earnings and discuss the use of “residual income” models.
We start with a general introduction to corporate valuation where we discuss important objectives of corporate valuation, including private equity fundraising, mergers, acquisitions and new issues.
We then explain how the analysis of a company’s financial statements can serve as a good starting point for valuation. We look at how assets, liabilities and cash flows can be analyzed to gain insight in the company’s operating efficiency and financial strength. We also discuss how historic financials should be restated before they can be meaningfully used in valuation, and we explain how management can use “financial shenanigans” to flatter financial statements.
We then continue to present three alternative (or complementary) routes to corporate valuation.
In asset-based valuation we look at the company’s “hard assets”, represented by their book value or liquidation value and explain how it can be determined whether a company is over- or undervalued by the market.
We then look at market-based valuation techniques that focus on the market price for similar businesses at a given point in time. Here, we explain how to assess the relative value of corporations by comparing their P/E ratio, PEG, comparable sales, gross revenues and other variables. We also explain how to compare corporate valuations on a risk-adjusted basis.
Further, we explain how corporations can be valued using models based upon projections of earnings and cash flows. We look “dividend discount models” as well as “free cash flow” models, where future cash flows and enterprise value are modelled on more explicit assumptions about firms’ “value drivers”.
Finally, we explain and demonstrate alternative measures of residual earnings and discuss the use of “residual income” models.
Market-Based Valuation
- Comparing P/E Ratios
- The Comparable Sales Method
- Rules of Thumb/industry Averages
- Other Comparables
- Risk-Adjusted Valuation
- CAPM and other models
- Case Study
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Future Earnings and Cash Flow Valuation
- Discounted Cash Flow Models
- Introduction to DDM models
- The zero growth model
- The constant growth model
- A two-stage growth model
- Multi-stage growth models
- Deriving growth rates from accounting ratios
- Estimating the discount rate
- The relationship between risk (beta) and the P/E ratio
- Sensitivity analysis
- Case study
- Exercise
Day Three
09.00 - 09.15 Recap
09.15 - 12.00 Future Earnings and Cash Flow Valuation (Cont’d)
- Introduction to Free Cash Flow Analysis
- The Company’s Value Drivers
- Sales growth
- Operating profit margin
- Taxes
- Working capital investments
- Fixed capital investments
- Free Cash Flow to Equity vs. Free Cash Flow to Firm
- Deriving the Free Cash Flows
- Deriving the Discount Rate and the Enterprise Value
- Analysis of Shareholder Value Creation
- Practical Case Study
- Small Exercise
12.00 - 13.00 Lunch
13.00 - 16.30 Future Earnings and Cash Flow Valuation (Cont’d)
- Residual Income Valuation
- Residual income models vs. DDM models
- Calculating residual income
- Economic Value Added, Market Value Added and the measures
- The EVA™ Model
- Residual income models: strengths and weaknesses
- Practical case study
- Small Exercise
Evaluation and Termination of the Seminar
