... items or
nonmarket base compensation to shareholders.
Risk management techniques are also available for use in val-
uation for M& amp ;A. Most commonly these involve traditional statisti-
cal parameters ... the most accurate in assessing the cost of capital for a
business and gauging general company and market risk, additional
risk analysis tools are available. M& amp ;A invest...
... which in the
process generally improves the information that is available
to their management. Such data is frequently lacking in
smaller businesses, a fact that may hamper management’s
assessment ... fixed.
2
2
Jay Shanken and Clifford W. Smith, “Implications of Capital Markets Research for
Corporate Finance,” Financial Management 25 (Spring 1996), pp. 98–1 04.
1 14 Income Approach...
...
managers with additional information for decision making.
102 Valuation Approaches and Fundamentals
analyzing M& amp ;A targets or investments in start-up companies or re-
search and development.
As ... shareholders.
Risk management techniques are also available for use in val-
uation for M& amp ;A. Most commonly these involve traditional statisti-
cal parameters that includ...
... ABV, of American Business Appraisers, San Francisco, Cali-
fornia; email: mjeaba@pacbell.com.
240 Measuring and Managing Value in High-Tech Start-Ups
and margins must be scrutinized carefully. ... of value. In the
merger and acquisition (M& amp ;A) world, however, much of the real
action takes place after stand-alone fair market value and invest-
ment value have been determined. S...
... stores and corner newsstands,
248 Measuring and Managing Value in High-Tech Start-Ups
accurately portrays value- creating performance. While traditional
companies generate earnings and cash outflows ... fair market value deter-
mination and for the strategic buyer in the investment value de-
termination. Those parties typically make estimates and assump-
tions based on the fa...
... the
valuation of companies. A must read!”
Steven F. Schroeder, JD, ASA, FIBA, MCBA
Economic and Valuation Services
Richard M. Wise, FCA, FCBV, ASA, MCBA
Wise, Blackman, CA
Jay Fishman, ASA
Principal
Kroll ... some but not all of its financing
costs. So capital providers are left uninformed about their
real cash return.
VALUATION FOR M& amp ;A
Building Value in
Private...
... primarily a financial calcula-
tion. They analyze historical financial performance, position and
cash flow, compute financial ratios, and compare them to indus-
try averages. Based on this information, ... timeliness of accounting information
and internal control
Although business valuation involves many financial calcula-
tions, it is not primarily a financial activity, particularly wh...
... results in a more thorough and accurate analysis.
While larger companies have M& amp ;A or business development
departments, those that lack this capacity internally may have to
add external legal, tax, ... investment value of the target but not its fair
market value. The combination also may lower the combined en-
tity’s financing costs and may allow for efficiencies in lease...
... performance or financial position may dis-
close different information about the target company. Market data
and company performance may allow use of only certain multi-
ples. For example, in ... result from using historical measures of
earnings compared to dubious book values. As explained in
Chapter 2, valid rates are derived by comparing current cash
investments at market value aga...
... be
considered for each value indicated because adjustments that are
appropriate for one indicated value may not apply to another. This
point is emphasized because a common error in business valua-
tion ... of Business Valuation
Approaches
Income Approach Market Approach
a
Asset Approach
The company derives
significant value from its
operations.
The company generates
a posi...