Valuation for Mergers, Buyouts, and Restructuring, Second Edition

Contents

Part One The Tools of Valuation

1. A User's Guide

1.1 Valuation of Stand-Alone Firms and Business Units

1.1.1 Free Cash-flow Valuation

1.1.2 Cost of Capital

1.1.3 Valuation Multiples

1.2 Economic Value Added

1.3 Valuation with Changing Capital Structure

1.4 Valuation in Developed and Emerging Markets

1.5 Mergers and Acquisitions

1.6 Deal Design and Special Offer Structures

1.7 Leveraged Buyouts

1.8 Recapitalization of Troubled Companies

1.9 Asset Restructuring

1.10 Real Options: Valuing Entry and Exit Options

1.10.1 Financial Options

1.11 Technical Notes and Problems

1.12 Valuation Aids and DealModeler® Software

2. Forecasting and Valuation of Free Cash Flows

2.1 Free Cash Flows

2.2 Building a Financial Model

2.3 Enterprise Valuation

2.4 Continuation Value

2.4.1 Forecast Consistency

2.4.2 Forecasting FCF_T

2.4.3 A Wrong Way to Forecast Continuation Value

2.4.4 Sensitivity to Parameter Estimates

2.4.5 Competitive Advantage Period

2.4.6 EBITDA Multiples

2.5 An Equivalent Approach: Valuing the Cash Flow to Equity

2.5.1 Decomposition of Free Cash Flows: Cash Flows to Equity and Debt

2.5.2 Equity Valuation

2.5.3 Debt Valuation

2.5.4 Financial Policy and Dividends

2.6 Some Practical Aspects

2.6.1 Choosing the Valuation Method

2.6.2 Personal Taxes and Enterprise Value

2.6.3 Enterprise Value in Tax-imputation Countries

2.6.4 Balance Sheet Adjustments

2.6.5 Cash and Marketable Securities

2.6.6 Mid-year Discounting

2.6.7 Dealing with Equity-linked and Other Securities in the Capital ...