...
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...
... 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...
... 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...
... 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...
... op-
erate a company and to make sound estimates 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 ... approach is less widely employed in M& amp ;A val-
uations than the income approach, values determined by it also
require careful review. Because the market approach primaril...
... or
experience in the rural market served by Cardinal, it imposed a
1% risk premium to reflect its movement into a less certain mar-
ket. Omni’s financial strength eliminates the financial and man-
agement ... . 04) )
(.28 Ϫ . 04)
Computation of the Stand-Alone Fair Market Value 271
Computation of Investment Value 287
Exhibit 16-20 Maximum Investment Value of Cardinal Invested
Cap...
... 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, ... operating performance. Similarly, manipula-
tions to income to minimize income taxes, such as paying above-mar-
ket compensation or rent for real estate used by the company and
owned by...
... target-company), 68
Risk, 14, 18
and interest rates, 120
macroenvironmental, 36
management of, 97–1 04
measurement of, 19
Monte Carlo simulation for
managing, 99–100
real option analysis for managing,
100–1 04
specific ... to appraise Cardinal.
Summary and Conclusion of Stand-Alone Fair Market Value
The results of the valuation procedures employed to compute
the fair market value...