... of
companies are reasonably
similar to the subject
company.
Merger and acquisition
transactions involve
acquirer circumstances
and targets that are
reasonably similar.
There is adequate data
available ... Market Value versus Investment Value 1 97
example, the LOMD, which is appropriate for the stand-alone
value of a private target, may be inappropriate for investment
value...
... 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...
... that
suggest a company will maintain its competitive advantages for-
ever. For example, in an industry that is growing at an annual rate
of 3%, an SPCM or MPDM computation that includes a long-term
growth ... tar-
get, MCAPM may be an acceptable methodology. When this data
is available, a beta for the target company is derived from the be-
tas of the guideline companies. In t...
... 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...
... valuing a company for merger and acquisi-
tion, performance improvement, or any other reason, competitive
analysis is an essential step.
Many people see valuation as primarily a financial calcula-
tion. ... timeliness of accounting information
and internal control
Although business valuation involves many financial calcula-
tions, it is not primarily a financial activity, particul...
... 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...
... 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 ... company carries debt securities that have interest rates
that are materially above or below market rates as of the valuation
date, the market value of the debt may vary from its book...
... 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 ... the
range of multiples of a group of companies, or a multiple within
or outside of that range.
The market approach relevant to valuation for M& amp ;A includes
two primary methods: the...
... 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...