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

Seeing the Dark Side of Valuation

When confronted with estimation challenges, analysts have one of two choices. The healthy response is to confront the challenge and adapt existing models to reflect the differences in the company being valued. The more common response is to bend the rules of valuation and use shortcuts to justify whatever price they are predisposed to pay for the company. The latter approach is “the dark side of valuation.” This section looks at its many manifestations.

Input Phase

In the input phase, we look for the standard starting points for valuing individual companies—earnings and operating details from the most recent financial statements; forecasts for the future, provided by analysts and management; and data for macroeconomic ...