Valuation for Mergers and Acquisitions
2nd Edition
Published on 8. August 2013
Book
Hardback
256 pages
978-0-13-337267-0 (ISBN)
Description
Master the latest insights, lessons, and best practice techniques for accurately valuing companies for potential mergers, acquisitions, and restructurings. Concise, realistic, and easy to use, Valuation for Mergers and Acquisitions, Second Edition has been fully updated to reflect the field's latest and most useful "rules of thumb," compare every modern approach to valuation, offering practical solutions for today's most complex and important valuation challenges. Treating valuation as both an art and a science, it covers the entire process, offering up-to-the-minute real-world advice, examples, and case studies. Leading valuation experts Barbara S. Petitt and Kenneth R. Ferris introduce and compare leading techniques including discounted cash flow analysis, earnings multiples analysis, adjusted present value analysis, economic value analysis, and real option analysis. They fully address related concerns such as the accounting structure of deals, accounting for goodwill, tax considerations, and more. Throughout, they identify common errors that lead to inaccurate valuation, and show how to avoid them. From start to finish, this guide doesn't just make valuation comprehensible: it provides the tools and insight to make valuation work.
For all financial professionals concerned with valuation, especially those involved in potential mergers, acquisitions, and restructurings; and for corporate finance instructors and students in Executive MBA programs concerned with valuation.
For all financial professionals concerned with valuation, especially those involved in potential mergers, acquisitions, and restructurings; and for corporate finance instructors and students in Executive MBA programs concerned with valuation.
More details
Edition
2nd edition
Language
English
Place of publication
Boston
United States
Publishing group
Pearson Education (US)
Target group
College/higher education
Professional and scholarly
Dimensions
Height: 100 mm
Width: 100 mm
Thickness: 100 mm
Weight
100 gr
ISBN-13
978-0-13-337267-0 (9780133372670)
Schweitzer Classification
Other editions
New editions
Kenneth R. Ferris | Barbara S. Petitt
Valuation (paperback)
Book
11/2007
Financial TImes Prentice Hall
€28.51
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Previous edition
Barbara S. Petitt | Kenneth R. Ferris
Valuation for Mergers and Acquisitions
Book
02/2013
2nd Edition
Financial TImes Prentice Hall
Unfortunately, price unknown
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Persons
Barbara S. Petitt, PhD, CFA, is Director, Curriculum Projects, EMEA at CFA Institute. She has an in-depth knowledge of equity valuation, mergers, acquisitions, and corporate restructurings. She has held academic positions at Thunderbird, School of Global Management in the U.S., Bournemouth University in the U.K., and SKEMA Business School in France, and consulted with corporate clients throughout Europe and North America. Petitt resides in Poole, U.K.
Kenneth R. Ferris, a valuation and acquisition consultant to small and mid-cap companies in Central America, served on the faculty at Northwestern's Kellogg School of Management; SMU's Cox School of Business; Thunderbird School of Global Management; Drucker School of Business at Claremont Graduate School, and Arizona State's W.P. Carey School of Business. He was a director for three NYSE-listed firms. Ferris resides in Placencia, Belize.
Valuation for Mergers and Acquisitions 9780133372670 Front Matter, pg 1
Kenneth R. Ferris, a valuation and acquisition consultant to small and mid-cap companies in Central America, served on the faculty at Northwestern's Kellogg School of Management; SMU's Cox School of Business; Thunderbird School of Global Management; Drucker School of Business at Claremont Graduate School, and Arizona State's W.P. Carey School of Business. He was a director for three NYSE-listed firms. Ferris resides in Placencia, Belize.
Valuation for Mergers and Acquisitions 9780133372670 Front Matter, pg 1
Content
Preface vii
Chapter 1 Valuation: An Overview 1
Market View 1
1 Why Companies Merge or Acquire: A Historical Perspective 3
1.1 Mergers and Acquisitions Waves 3
1.2 Motivations for Mergers and Acquisitions 6
2 Do Mergers and Acquisitions Create Shareholder Value? 8
3 Merger and Acquisition Premiums 9
4 Valuation Process 10
5 Valuation Methods: An Overview 12
5.1 Relative Valuation Methods 14
5.2 Direct Valuation Methods 17
5.3 The Use of Valuation Methods 19
Summary 20
Endnotes 20
Chapter 2 Financial Review and Pro Forma Analysis 23
Market View 23
1 Financial Review 25
1.1 Ratio Analysis 26
1.2 Decomposition Analysis 32
1.3 Cash Flow Analysis 42
2 Pro Forma Analysis 49
2.1 Pro Forma Financial Statements 49
2.2 Sensitivity, Scenario, and Monte Carlo Simulation Analyses 59
Summary 60
Endnotes 61
Appendix 2A: Mattel's Financial Statements 66
Appendix 2B: Preparation of a Cash Flow Statement. . . . 69
Cash Flow Fundamentals 69
Summary 81
Appendix 2C: Account Forecasting Alternatives 82
Chapter 3 Traditional Valuation Methods 85
Market View 85
1 Earnings Multiples 87
2 Discounted Cash Flow Models 92
2.1 Operational Dilemmas 92
2.2 Estimating the Entity Value and Equity Value 104
2.3 A Survey of Best Practices 108
2.4 Cross-Border Considerations 109
2.5 Illustration 111
Summary 118
Endnotes 119
Appendix 3: Some Frequently Asked Questions and Answers About the Free Cash Flow to the Firm Model and Earnings Multiples 124
Chapter 4 Alternative Valuation Methods 133
Market View 133
1 Relative Valuation Methods 136
1.1 Price Multiples 136
1.2 Enterprise Value Multiples 141
2 Direct Valuation Methods 144
2.1 Discounted Cash Flow Models 144
2.2 Economic Income Models 158
2.3 Real Option Analysis 165
Summary 170
Endnotes 171
Appendix 4: How to Use the Black-Scholes Model to Value a Red Option 176
Black-Scholes Model 177
Luehrman's NPVq/Cumulative Volatility Approach 178
Chapter 5 Accounting Dilemmas in Valuation Analysis 181
Market View 181
1 Assessing Economic Reality 183
2 Income Statement Transformations: Forecasting Permanent Earnings and Free Cash Flows 185
2.1 Recurring and Nonrecurring Events 185
2.2 Revenue Recognition Policy 186
2.3 Inventory Costing Policy 190
2.4 Depreciation Policy 193
3 Balance Sheet Transformations: Forecasting the Equity Value of a Company 195
3.1 Asset Capitalization Policy 196
3.2 Asset Revaluation Policy 199
3.3 Off-Balance-Sheet Debt 200
4 Cash Flow Statement Transformations: Forecasting CFFO and Free Cash Flow 205
Summary 206
Endnotes 208
Chapter 6 Financial Reporting and Tax Considerations for Mergers and Acquisitions 211
Market View 211
1 Financial Reporting: To Combine or Not to Combine? 213
2 Consolidated Financial Reporting: Purchase Accounting 214
3 Noncontrolling Interest 218
4 Accounting for Goodwill 220
5 Tax Considerations of Mergers and Acquisitions 222
6 Tax Considerations of Goodwill 224
Summary 225
Endnotes 225
Chapter 7 Some Final Thoughts 229
Market View 229
1 Valuation: A Debriefing 230
2 Some Caveats to Consider 231
3 Closure 233
Endnote. 233
Bibliography 235
Index 239
Chapter 1 Valuation: An Overview 1
Market View 1
1 Why Companies Merge or Acquire: A Historical Perspective 3
1.1 Mergers and Acquisitions Waves 3
1.2 Motivations for Mergers and Acquisitions 6
2 Do Mergers and Acquisitions Create Shareholder Value? 8
3 Merger and Acquisition Premiums 9
4 Valuation Process 10
5 Valuation Methods: An Overview 12
5.1 Relative Valuation Methods 14
5.2 Direct Valuation Methods 17
5.3 The Use of Valuation Methods 19
Summary 20
Endnotes 20
Chapter 2 Financial Review and Pro Forma Analysis 23
Market View 23
1 Financial Review 25
1.1 Ratio Analysis 26
1.2 Decomposition Analysis 32
1.3 Cash Flow Analysis 42
2 Pro Forma Analysis 49
2.1 Pro Forma Financial Statements 49
2.2 Sensitivity, Scenario, and Monte Carlo Simulation Analyses 59
Summary 60
Endnotes 61
Appendix 2A: Mattel's Financial Statements 66
Appendix 2B: Preparation of a Cash Flow Statement. . . . 69
Cash Flow Fundamentals 69
Summary 81
Appendix 2C: Account Forecasting Alternatives 82
Chapter 3 Traditional Valuation Methods 85
Market View 85
1 Earnings Multiples 87
2 Discounted Cash Flow Models 92
2.1 Operational Dilemmas 92
2.2 Estimating the Entity Value and Equity Value 104
2.3 A Survey of Best Practices 108
2.4 Cross-Border Considerations 109
2.5 Illustration 111
Summary 118
Endnotes 119
Appendix 3: Some Frequently Asked Questions and Answers About the Free Cash Flow to the Firm Model and Earnings Multiples 124
Chapter 4 Alternative Valuation Methods 133
Market View 133
1 Relative Valuation Methods 136
1.1 Price Multiples 136
1.2 Enterprise Value Multiples 141
2 Direct Valuation Methods 144
2.1 Discounted Cash Flow Models 144
2.2 Economic Income Models 158
2.3 Real Option Analysis 165
Summary 170
Endnotes 171
Appendix 4: How to Use the Black-Scholes Model to Value a Red Option 176
Black-Scholes Model 177
Luehrman's NPVq/Cumulative Volatility Approach 178
Chapter 5 Accounting Dilemmas in Valuation Analysis 181
Market View 181
1 Assessing Economic Reality 183
2 Income Statement Transformations: Forecasting Permanent Earnings and Free Cash Flows 185
2.1 Recurring and Nonrecurring Events 185
2.2 Revenue Recognition Policy 186
2.3 Inventory Costing Policy 190
2.4 Depreciation Policy 193
3 Balance Sheet Transformations: Forecasting the Equity Value of a Company 195
3.1 Asset Capitalization Policy 196
3.2 Asset Revaluation Policy 199
3.3 Off-Balance-Sheet Debt 200
4 Cash Flow Statement Transformations: Forecasting CFFO and Free Cash Flow 205
Summary 206
Endnotes 208
Chapter 6 Financial Reporting and Tax Considerations for Mergers and Acquisitions 211
Market View 211
1 Financial Reporting: To Combine or Not to Combine? 213
2 Consolidated Financial Reporting: Purchase Accounting 214
3 Noncontrolling Interest 218
4 Accounting for Goodwill 220
5 Tax Considerations of Mergers and Acquisitions 222
6 Tax Considerations of Goodwill 224
Summary 225
Endnotes 225
Chapter 7 Some Final Thoughts 229
Market View 229
1 Valuation: A Debriefing 230
2 Some Caveats to Consider 231
3 Closure 233
Endnote. 233
Bibliography 235
Index 239