The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition

The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition

by Aswath Damodaran
Released July 2009
Publisher(s): Pearson
ISBN: 9780137036585

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Book description

Renowned valuation expert Aswath Damodaran reviews the core tools of valuation, examines today’s most difficult estimation questions and issues, and then systematically addresses the valuation challenges that arise throughout a firm’s lifecycle in The Dark Side of Valuation: Valuing Young, Distressed and Complex Businesses.

In this thoroughly revised edition, he broadens his perspective to consider all companies that resist easy valuation, highlighting specific types of hard-to-value firms, including commodity firms, cyclical companies, financial services firms, organizations dependent on intangible assets, and global firms operating diverse businesses. He covers the entire corporate lifecycle, from “idea” and “nascent growth” companies to those in decline and distress, and offers specific guidance for valuing technology, human capital, commodity, and cyclical firms. Damodaran places special emphasis on the financial sector, illuminating the implications of today’s radically changed credit markets for valuation and addresses valuation questions that have suddenly gained urgency, ranging from “Are U.S. treasuries risk free?” to “How do you value assets in highly illiquid markets?” Readers will gain insight into:

·         Overcoming the temptation to use unrealistic or simplistic valuation methods

·         Risk-free rates, risk premiums and other macroeconomic assumptions

·         Intelligent analysis for angel and early venture capital investing

·         Projecting the impact of regulatory changes

·         The stages of the corporate lifecycle

·         Valuing financial services and commodities companies

  

Damodaran’s insights will be indispensable to everyone involved in valuation: financial professionals, investors, M&A specialists, and entrepreneurs alike.

Table of contents

  1. Copyright
  2. Preface
  3. About the Author
  4. The Dark Side of Valuation
    1. Foundations of Value
    2. Valuation Across Time
    3. Valuation Across the Life Cycle
    4. Valuation Across the Business Spectrum
    5. Seeing the Dark Side of Valuation
    6. Conclusion
  5. Intrinsic Valuation
    1. Discounted Cash Flow Valuation
    2. Variations on DCF Valuation
    3. What Do Intrinsic Valuation Models Tell Us?
    4. Conclusion
  6. Probabilistic Valuation: Scenario Analysis, Decision Trees, and Simulations
    1. Scenario Analysis
    2. Decision Trees
    3. Simulations
    4. An Overall View of Probabilistic Risk Assessment Approaches
    5. Conclusion
  7. Relative Valuation
    1. What Is Relative Valuation?
    2. The Ubiquity of Relative Valuation
    3. Reasons for Popularity and Potential Pitfalls
    4. Standardized Values and Multiples
    5. The Four Basic Steps of Using Multiples
    6. Reconciling Relative and Intrinsic Valuations
    7. Conclusion
  8. Real Options Valuation
    1. The Essence of Real Options
    2. Real Options, Risk-Adjusted Value, and Probabilistic Assessments
    3. Real Options Examples
    4. Caveats for Real Options
    5. Conclusion
    6. Appendix 5.1: Basics of Options and Option Pricing
  9. A Shaky Base: A “Risky” Risk-Free Rate
    1. What Is a Risk-Free Asset?
    2. Why Do Risk-Free Rates Matter?
    3. Estimating a Risk-Free Rate
    4. Issues in Estimating Risk-Free Rates
    5. Closing Thoughts on Risk-Free Rates
    6. Conclusion
    7. Appendix 6.1
  10. Risky Ventures: Assessing the Price of Risk
    1. Why Do Risk Premiums Matter?
    2. What Are the Determinants of Risk Premiums?
    3. Standard Approaches for Estimating Risk Premiums
    4. Conclusion
  11. Macro Matters: The Real Economy
    1. Growth in the Real Economy
    2. Expected Inflation
    3. Exchange Rates
    4. Current Practices
    5. The Dark Side
    6. Remedies
    7. Conclusion
  12. Baby Steps: Young and Start-Up Companies
    1. Young Companies in the Economy
    2. Valuation Issues
    3. The Dark Side of Valuation
    4. The Light Side of Valuation
    5. Conclusion
  13. Shooting Stars? Growth Companies
    1. Growth Companies
    2. Valuation Issues
    3. The Dark Side of Valuation
    4. The Light Side of Valuation
    5. Conclusion
  14. The Grown-Ups: Mature Companies
    1. Mature Companies in the Economy
    2. Valuation Issues
    3. The Dark Side of Valuation
    4. The Light Side of Valuation
    5. Conclusion
  15. Winding Down: Declining Companies
    1. Declining Companies in the Economy
    2. Valuation Issues
    3. The Dark Side of Valuation
    4. The Light Side of Valuation
    5. Conclusion
  16. Ups and Downs: Cyclical and Commodity Companies
    1. The Setting
    2. The Dark Side of Valuation
    3. The Light Side of Valuation
    4. Conclusion
  17. Mark to Market: Financial Services Companies
    1. Financial Services Firms: The Big Picture
    2. Characteristics of Financial Services Firms
    3. The Dark Side of Valuation
    4. Conclusion
  18. Invisible Investments: Firms with Intangible Assets
    1. Firms with Intangible Assets
    2. The Dark Side of Valuation
    3. The Light Side of Valuation
    4. Conclusion
  19. Volatility Rules: Emerging-Market Companies
    1. The Role of Emerging-Market Companies
    2. The Dark Side of Valuation
    3. The Light Side of Valuation
    4. Conclusion
  20. The Octopus: Multibusiness Global Companies
    1. Multinationals
    2. Valuation Issues
    3. The Dark Side of Valuation
    4. The Light Side of Valuation
    5. Conclusion
  21. Going Over to the Light: Vanquishing the Dark Side
    1. Enlightening Propositions
    2. Conclusion

Product information

  • Title: The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition
  • Author(s): Aswath Damodaran
  • Release date: July 2009
  • Publisher(s): Pearson
  • ISBN: 9780137036585