Valuation for M and A Building Value in Private Companies

ISBN-10: 0470604417

ISBN-13: 9780470604410

Edition: 2nd 2010

Authors: Chris M. Mellen, Frank C. Evans

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Discover the tools necessary to determine what your company′s value is, what drives its value, and how to enhance that value during an M&AThe only book to focus on valuation specifically for merger and acquisitions, Valuation For M&A: Building Value in Private Companies, Second Edition lays out the steps for measuring and managing value creation in privately held businesses. Recognizes a company as an investment and explains how to manage that value to maximize shareholder returns, focusing on returns, risks, and capital invested Explains investment or strategic value versus fair market value and provides a document request checklist; sample interview questions; and formats for adjusting financial statements, developing discount rates, the computation of net cash flow; and a valuation reconciliation form Includes a comprehensive case study to illustrate concepts and calculations Now covers fair value accounting and the impact of SFAS Nos. 141 and 157, intangible asset valuation techniques, private capital markets, exiting planning, international M&As, and venture backed/early stage companiesShowing corporate executives as well as M&A professionals and business appraisers how to value privately-held businesses for merger and acquisition purposes, this book helps investors, executives, and their advisors determine the optimum strategy to enhance both market value and strategic value to maximize return on investment.
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Book details

List price: $80.00
Edition: 2nd
Copyright year: 2010
Publisher: John Wiley & Sons, Limited
Publication date: 6/18/2010
Binding: Hardcover
Pages: 400
Size: 6.25" wide x 9.25" long x 1.25" tall
Weight: 1.320

Dedication and Acknowledgmentsxv
Winning through Merger and Acquisition
Critical Values Shareholders Overlook
Stand-alone Fair Market Value
Investment Value to Strategic Buyers
"Win-Win": Benefits of Merger and Acquisition
Building Value and Measuring Return on Investment in a Private Company
Public Company Value Creation Model
Computing Private Company Value Creation and ROI
Analyzing Value Creation Strategies
Competitive Analysis
Linking Strategic Planning to Building Value
Assessing Specific-Company Risk
Competitive Factors Frequently Encountered in Nonpublic Entities
Financial Analysis
Merger and Acquisition Market and Planning Process
Common Seller and Buyer Motivations
Why Mergers and Acquisitions Fail
Sales Strategy and Process
Acquisition Strategy and Process
Due Diligence Preparation
Measuring Synergies
Synergy Measurement Process
Key Variables in Assessing Synergies
Synergy and Advance Planning
Exit Planning
Why Is Exit Planning So Difficult?
What Makes Planning for Your Private Company Investment Unique?
Why Should Exit Planning for Your Private Company Begin Now?
Exit Planning Process
Setting Exit Goals
Owner Readiness
Type of Exiting Owner
Exit Options
Range of Values
Execution of Exit Plan
Valuation Approaches and Fundamentals
Business Valuation Approaches
Using the Invested Capital Model to Define the Investment Being Appraised
Why Net Cash Flow Measures Value Most Accurately
Frequent Need to Negotiate from Earnings Measures
Financial Statement Adjustments
Managing Investment Risk in Merger and Acquisition
Income Approach: Using Rates and Returns to Establish Value
Why Values for Merger and Acquisition Should Be Driven by the Income Approach
Two Methods within the Income Approach
Three-Stage DCF Model
Establishing Defendable Long-term Growth Rates and Terminal Values
Cost of Capital Essentials for Accurate Valuations
Cost of Debt Capital
Cost of Preferred Stock
Cost of Common Stock
Fundamentals and Limitations of the Capital Asset Pricing Model
Modified Capital Asset Pricing Model
Build-up Model
Summary of Ibbotson Rate of Return Data
Private Cost of Capital
International Cost of Capital
How to Develop an Equity Cost for a Target Company
Weighted Average Cost of Capital
Iterative Weighted Average Cost of Capital Process
Shortcut Weighted Average Cost of Capital Formula
Common Errors in Computing Cost of Capital
Market Approach: Using Guideline Companies and Strategic Transactions
Merger and Acquisition Transactional Data Method
Guideline Public Company Method
Selection of Valuation Multiples
Market Multiples Commonly Used
Asset Approach
Book Value versus Market Value
Premises of Value
Use of the Asset Approach to Value Lack-of-Control Interests
Adjusted Book Value Method
Treatment of Nonoperating Assets or Asset Surpluses or Shortages
Specific Steps in Computing Adjusted Book Value
Adjusting Value through Premiums and Discounts
Applicability of Premiums and Discounts
Application and Derivation of Premiums and Discounts
Apply Discretion in the Size of the Adjustment
Control versus Lack of Control in Income-driven Methods
Fair Market Value versus Investment Value
Reconciling Initial Value Estimates and Determining Value Conclusion
Essential Need for Broad Perspective
Income Approach Review
Market Approach Review
Asset Approach Review
Value Reconciliation and Conclusion
Checks to Value
Candidly Assess Valuation Capabilities
Art of the Deal
Unique Negotiation Challenges
Deal Structure: Stock versus Assets
Terms of Sale: Cash versus Stock
Bridging the Gap
See the Deal from the Other Side
M&A and Financial Reporting
Relevant FASB and IFRS Statements
Reviews by the Audit Firm
ASC 820: Fair Value Measurements (SFAS 157)
ASC 805: Business Combinations (SFAS 141(R))
ASC 350: Goodwill and Other Intangible Assets (SFAS 142)
Incorporating ASC 805 (SFAS 141(R)) into the Due Diligence Process
Intangible Asset Valuation
Approaches to Valuing Intangible Assets
Key Components to Intangible Asset Valuation
Intangible Asset Valuation Methods
Measuring and Managing Value in High-Tech Start-ups
Why Appraisals of High-Tech Start-ups Are Essential
Key Differences in High-Tech Start-ups
Value Management Begins with Competitive Analysis
Stages of Development
Risk and Discount Rates
Start-ups and Traditional Valuation Methods
QED Survey of Valuation Methods Used by Venture Capitalists
A Probability-Weighted Scenario Method to Value Start-ups
Equity Allocation Methods
Cross-Border M&A
Strategic Buy-Side Considerations
Due Diligence
Sell-Side Considerations
Merger and Acquisition Valuation Case Study
History and Competitive Conditions
Potential Buyers
General Economic Conditions
Specific Industry Conditions
Computation of the Stand-alone Fair Market Value
Computation of Investment Value
Suggested Considerations to Case Conclusion
About the Authors
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