并購整合估價(共36).ppt

1、Valuation MBA1 FinanceValuation as a ToolWe encounter valuation in many situations:Mergers & AcquisitionsLeveraged Buy-outs (LBOs & MBOs)Sell-offs, spin-offs, divestituresInvestors buying a minority interest in companyInitial public offerings How do we establish value of assets?Objective tod

2、ay: To preview valuation methods used most commonly in practiceMBA1 FinanceBusiness Valuation TechniquesDiscounted cash flow (DCF) approachesDividend discount modelFree cash flows to equity model (direct approach)Free cash flows to the firm model (indirect approach)Relative valuation approachesP/E (

3、capitalization of earnings)Enterprise Value/EBITDA Other: P/CF, P/B, P/S Control transaction based models (e.g. value based on acquisition premia of “similar” transactions) MBA1 FinanceDiscounted Cash Flow ValuationWhat cash flow to discount?Investors in stock receive dividends, or periodic cash dis

4、tributions from the firm, and capital gains on re-sale of stock in futureIf investor buys and holds stock forever, all they receive are dividendsIn dividend discount model (DDM), analysts forecast future dividends for a company and discount at the required equity return Problem with dividends: they

5、are “managed”MBA1 FinanceDividends: The Stability FactorFactors that influence dividends:Desire for stabilityFuture investment needsTax factorsSignaling prerogativesDividend changes: Publicly traded U.S. FirmsSource: A. Damodaran, Investment Valuation, Wiley, 1997MBA1 FinanceValuation: Back to First

6、 PrinciplesValue of the firm = value of fixed claims (debt) + value of equity How do managers add to equity value?By taking on projects with positive net present value (NPV)Equity value = equity capital provided + NPV of future projectsNote: Market to book ratio (or “Tobins Q” ratio) 1 if market exp

7、ects firm to take on positive NPV projects (i.e. firm has significant “growth opportunities”)MBA1 FinanceValuation: First PrinciplesTotal value of the firm = debt capital provided + equity capital provided+ NPV of all future projects project for the firm= uninvested capital +present value of cash fl

8、ows from all future projects for the firmNote: This recognizes that not all capital may be currently used to invest in projectsMBA1 FinanceThe Valuation ProcessIdentify cash flows available to all stakeholders Compute present value of cash flowsDiscount the cash flows at the firms weighted average c

9、ost of capital (WACC)The present value of future cash flows is referred to as:Value of the firms invested capital, orValue of “operating assets” or “Total Enterprise Value” (TEV)MBA1 FinanceThe Valuation Process, continuedValue of all the firms assets (or value of “the firm”) = Vfirm = TEV + the val

10、ue of uninvested capitalUninvested capital includes:assets not required (“redundant assets”) “excess” cash (not needed for day-to-day operations)Value of the firms equity = Vequity = Vfirm - Vdebtwhere Vdebt is value of fixed obligations (primarily debt) MBA1 FinanceTotal Enterprise Value (TEV)For m

11、ost firms, the most significant item of uninvested capital is cashVfirm = Vequity + Vdebt = TEV + cashTEV = Vequity + Vdebt - cashTEV = Vequity + Net debtwhere Net debt is debt - cash (note: this assumes all cash is “excess”)MBA1 FinanceMeasuring Cash FlowsFree Cash Flow to the Firm (FCFF)represents

12、 cash flows to which all stakeholders make claim FCFF = EBIT (1 - tax rate) + Depreciation and amortization (non cash items)- Capital Expenditures - Increase in Working CapitalWhat is working capital?Non-cash current assets - non-interest bearing current liabilities (e.g. A/P & accrued liab.)MBA

13、1 FinanceWorking Capital vs. Permanent FinancingShort-termassetsShort- termliabilitiesPermanentCapitalLong-termassetsPermanentCapitalOperatingassetsWorking capitalPermanent capital may include “current” items such as bank loans if debt is likely to remain on the booksKey: Treat items as either worki

14、ng capital permanent capital but not bothUninvestedcapitalMBA1 FinanceFCFF vs. Accounting Cash FlowsIncome Statement, Hudsons Bay($millions, FYE Jan 1999)Sales$7,075Cost of Goods Sold $6,719EBITDA $ 356Depreciation$ 169EBIT$ 187Interest Expense $ 97Income Taxes$ 50Net Income$ 40Dividends $ 53Cash Fl

15、ow Statement, Hudsons Bay, ($millions, FYE Jan 1999)Cash flow from operations Net Income $ 40 Non-cash expenses $ 169 Changes in WC ($116)Cash provided (used) by investments Additions to P,P & E ($719)Cash provided (used) by financing Additions (reductions) to debt $ 259 Additions (reductions) t

16、o equity $ 356 Dividends ($ 53)Overall Net Cash Flows ($ 64)Hudsons Bay FCFF = 187 * (1- 0.44) + 169 - 719 - 116 = ($ 561)MBA1 FinanceCash Flow Definition IssuesHow is FCFF different than accounting cash flows?Operating cash flows includes interest paid We want to identify cash flows before they are

17、 allocated to claimholdersFCFF also appears to miss tax savings due to debtKey: these tax savings are accounted for in WACCMBA1 FinanceAn Example$1 million capital required to start firmCapital structure: 20% debt (10% pre-tax required return)10% preferred debt (7% required return) 70% equity (15% r

18、equired return)tax rate is 50%firm expects to generate 244,000 EBIT in perpetuityfuture capital expenditures just offset depreciationno future additional working capital investments are requiredWhat should be the value of this firm?MBA1 FinanceAn Example, continuedAfter tax WACC is 12.2% so pre-tax

19、WACC is 24.4%EBIT / capital is also 24.4%, so NPV of future projects for this firm is zeroValue of firm should equal $1 million (invested capital)FCFF = EBIT * (1-t) = $122,000Value = 122,000 / 0.122 = $1,000,000MBA1 FinanceTwo Stage FCFF ValuationImpossible to forecast cash flow indefinitely into t

20、he future with accuracyTypical solution: break future into “stages”Stage 1 : firm experiences high growthSources of extraordinary growth:product segmentationlow cost producerPeriod of extraordinary growth:based on competitive analysis / industry analysisStage 2: firm experiences stable growthMBA1 Fi

21、nanceStage 1 ValuationForecast annual FCFF as far as firm expects to experience extraordinary growthgenerally sales driven forecasts based on historical growth rates or analyst forecastsEBIT, capital expenditures, working capital given as a percentage of salesDiscount FCFF at the firms WACC (kc)FCFF

22、1 + FCFF2 + . . . + FCFFt1+kc (1+kc)2 (1+kc)tVALUE1 =MBA1 FinanceStage 2 ValuationStart with last FCFF in Stage 1Assume that cash flow will grow at constant rate in perpetuityInitial FCFF of Stage 2 may need adjustment if last cash flow of Stage 1 is “unusual” spike in sales or other itemscapital ex

23、penditures should be close to depreciationValue 1 year before Stage 2 begins =FCFFt * (1+g)Kc - gMBA1 FinanceStage 2 ValuationPresent value of Stage 2 cash flows (Terminal Value or TV):Key issue in implementation: Terminal growth (g) rate of “stable” growth in the economy (real rate of return 1-2% p

24、lus inflation)TEV = VALUEt + TV1(1+kc)txTV =FCFFt * (1+g)Kc - gMBA1 FinanceDiscounted FCFF ExampleAssumptionsYearEBIT Dep Cap ExW/C Change1 40 4 6 22 50 5 7 33 60 6 8 4Tax rate = 40% kc = 10%Vdebt = value of debt = $100 Growth (g) of FCFFs beyond year 3 = 3%MBA1 FinanceDiscounted FCFF Example (contd

25、)FCFF = EBIT*(1-t) + Dep - CapEx - Increase in WC Year 1 FCFF = 40*(1 - 0.4) + 4 - 6 - 2 = 20Year 2 FCFF = 50*(1 - 0.4) + 5 - 7 - 3 = 25Year 3 FCFF = 60*(1 - 0.4) + 6 - 8 - 4 = 30MBA1 FinanceDiscounted FCFF Example (contd) 20 25 30 30*(1+g) 30*(1+g)2 | | | | | | t=0 1 2 3 4 5P = Vfirm 30*(1+g)/(kc-g

26、)TEV = 20/(1+kc) + 25/(1+kc)2 + 30/(1+kc)3 + 30*(1+g)/(kc-g)/(1+kc)3MBA1 FinanceDiscounted FCFF Example (contd)TEV = 20/(1.10) + 25/(1.10)2 + 30/(1.10)3 + 30*(1.03)/(0.10 - 0.03)/(1.10)3 = 18.2 + 20.7 + 22.5 + 331.7 = 393.0TEV + Cash = Vfirm = Vfirm = TEV =393.0Vfirm = Vdebt + Vequity = Vequity = Vf

27、irm - Vdebt Vequity = 393.0 - 100.0 = 293.0Relative Valuation ApproachesMBA1 FinanceCapitalization of EarningsCompute the ratio of stock price to forecasted earnings for “comparable” firms determine an appropriate “P/E multiple”If EPS1 is the expected earnings for firm we are valuing, then the price

28、 of the firm (P) should be such that:P / EPS1 = “P/E multiple”Rearranging, P = “P/E multiple” x EPS1MBA1 FinanceP/E Ratios and the DDMRecall the constant growth DDM model, but apply it to a firm with 100% payout ratio:P/E ratios capture the inherent growth prospects of the firm and the risks embedde

29、d in discount rateP = D1 ke - gP = EPS1 ke - g P = 1 EPS1 ke - gMBA1 FinanceP/E Ratio Based ValuationFundamentally, the “P/E multiple” relates to growth and risk of underlying cash flows for firmKey: identification of “comparable” firmssimilar industry, growth prospects, risk, leverageindustry avera

30、geMBA1 FinanceTEV / EBITDA ApproachTEV = MVequity + MVdebt - cashEBITDA: earnings before taxes, interest, depreciation & amortizationCompute the ratio of TEV to forecasted EBITDA for “comparable” firms determine an appropriate “TEV/EBITDA multiple”If EBITDA1 is the expected earnings for firm we

31、are valuing, then the TEV for the firm should be such that: TEV / EBITDA1 = “EV/EBITDA multiple”MBA1 FinanceTEV / EBITDA ApproachRearranging: TEV = “EV/EBITDA multiple” x EBITDA1Next solve for equity value using:MVequity = TEV - MVdebt + cashMultiples again determined from “comparable” firms similar

32、 issues as in the application of P/E multiplesleverage less important concernMBA1 FinanceOther Multiple Based ApproachesOther multiples: Price to Cash Flow:P = “P/CF multiple” X CF1Price to Revenue:P = “P/Rev multiple” X REV1Multiple again determined from “comparable” firmsWhy would you consider pri

33、ce to revenue over, for example, price to earnings?MBA1 FinanceMerger MethodsComparable transactions:Identify recent transactions that are “similar”Ratio-based valuationLook at ratios to price paid in transaction to various target financials (earnings, EBITDA, sales, etc.)Ratio should be similar in

34、this transactionPremium paid analysisLook at premiums in recent merger transactions (price paid to recent stock price)Premium should be similar in this transactionMBA1 FinanceValuation Case ProcessSize-up the firm being valueddo projections seem realistic (look at past growth rates, past ratios to s

35、ales, etc.)?what are the key risks?Valuation analysisseveral approaches + sensitivities (tied to risks)Address case specific issuese.g. for M&A: what is fit (size-up bidder), any synergies, bidding strategy, structuring the transaction, etc.e.g. for capital raising: timing, deal structure, etc.MBA1 FinanceThe Valuation “Myths”Like all analytical disciplines, valuation has developed its own set of myths over time:Myth 1. Valuation models are quantitative, so it i