This course can also be presented face to face in-house or live in-house webinar.
Valuing A Business Course Objectives:
- Be introduced to major valuation principles
- Get an overview of the accounting approach with the accounting measure of performance and value, and the problems involved with “operative accounting”
- Have explained to them accounting valuation metrics with net asset valuations and dividend-based models, as well as the application of earnings-based multiples
- Gain an understanding of the comparable company valuation issues, and ascertain whether comparability is achievable
- Be taught about how to calculate the cost of capital including assessing the cost of debt and calculating the cost of equity
- Experience the use of the cash flow approach to valuation
Valuing A Business Course Content:
- Value to whom?
- Price and intrinsic value
- The risk / return trade off
- Strategic risk
The Accounting Approach
- Accounting measures of performance and value
- Problems of the accounting approach
- Are profits relevant?
- GAAP vs IFRS
- Creative accounting
- How to find it
- Recent examples
Review: Was the near collapse of Quindell inevitable?
Accounting Valuation Metrics
- Asset and net asset valuations
- Dividend-based models
- Dividend yield
- Dividend discounting
- Application and drawbacks of dividend models
- Price / earnings ratios
- P/E strengths and weaknesses
- PEG ratios
- Enterprise value
Exercise: Valuation of a business using different metrics
Comparable Company Valuation Issues
- Is the comparability achievable?
- Accounting principles
- Averages, medians, outlines
- Listed vs private
- Sustainability of earnings
- Business model flexibility
Exercise: Project Oxford, using comparable company techniques to value a company for acquisition
Calculating the Cost of Capital
- Assessing the cost of debt
- Calculating the cost of equity
- The risk free rate
- Equity premium
- The weighted average cost of capital
- The flaws in the capital asset pricing model
- Alternative approaches
Exercise: Calculating the cost of equity and the weighted average cost of capital
The Cash Flow Approach to Valuation
- The time value of money
- Calculating the discount rate
- Forecasting free cash flow
- Calculating FCF
- Identifying value drivers
- Terminal value
Exercise: Discounting free cash flow to arrive at a value per share
Exercise: Project Media. Using an Excel spreadsheet and given assumptions to arrive at a value of a company that is an acquisition target
Project Media II. Varying inputs, in particular the debt / equity mix of the acquisition financing, to consider the maximum price that could be paid for the target
Background of the trainer:
The trainer has over 40 years of City experience, encompassing banking, investment banking, M&A, and corporate finance at Citicorp, early stage investment, and corporate advisory work. He is a director of several companies and chairman of a fast-growing software company quoted on AIM.
Besides having been a visiting lecturer at the City of London (now Cass) Business School, he has 20 years’ experience of delivering in-house training to leading banks and investment banks in the UK, Europe, Africa, Asia and the USA, and public courses in UK, Europe and Asia covering M&A, company valuation, investment banking, corporate finance and credit analysis.
Valuing A Business Course Summary:
Valuation of a business, whether in the context of investment or M&A, is central to the negotiation of a transaction. Methods of valuation vary and a fundamental difference exists between the accounting and cash-based approaches.
The Valuing A Business course covers the topics of the financial ratios used in comparable company valuation, creative accounting, and the cost of capital, forecasting and discounting free cash flow. Exercises include the use of an Excel spreadsheet as input to valuing a business and, accordingly, attendees are requested to bring a laptop to the course.