《并购定价》PPT课件.ppt

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1、CONFIDENTIALValuation for”dummies”-A beginners guide to valuation in an M&A situationPeter Bonnn CPJohn Hansen CPJrgen Rugholm CPKasper Vaala CPApril,2001This report contains information that is confidential and proprietary to McKinsey&Company and is solely for the use of McKinsey&Company personnel.

2、No part of it may be used,circulated,quoted,or reproduced for distribution outside McKinsey&Company.If you are not the intended recipient of this report,you are hereby notified that the use,circulation,quoting,or reproducing of this report is strictly prohibited and may be unlawful.010420_Valuation_

3、Beginners_Guide_FCP007CPCONTENTSIntroduction to valuationDCF valuationMultiples valuation1010420_Valuation_Beginners_Guide_FCP007CPCONTENTSDCF valuationMultiples valuationThe purpose of valuation is to estimate the net present value of a company The result of the valuation yields the accumulated val

4、ue of the equity and the net debt,in total called the aggregate valueThe basis for valuation is historical and future financial parametersIntroduction to valuation2010420_Valuation_Beginners_Guide_FCP007CPOUR BELIEFS ABOUT VALUATIONValuation is not an exact scienceThere is no single value of a compa

5、ny,rather a range of potential valuesValuation should be carried out using more than one method,if at all possibleEach of the conventional methods(DCF,trading multiples,precedent transaction multiples,etc.)have inherent risks of biasesTechnical parameters(WACC and terminal growth rate)have great imp

6、act on value and it is paramount to allocate enough time on theseUse of multiple valuation methods opens up the negotiation spaceIt is critical to fully understand the implications of various methods to focus the negotiations in the preferred directionActual value agreed upon in a transaction usuall

7、y differs from perceived valueIn many situations there may be a CF&S specialist on the team but it is still important for the whole team to have a basic understanding of valuation methodologies 3010420_Valuation_Beginners_Guide_FCP007CPTHE VALUE OF A COMPANY CONSISTS OF TWO PARTS*Aggregate value is

8、sometimes called Enterprise Value(EV),which in turn is sometimes confused with Equity value.To avoid confusion,when referring to the total value of an entity,the investment banking notation of Aggregate Value(AV)is used throughout this presentation*In principle,market value of Net debt should be use

9、d.This,however,is rarely available and,as an approximation,the latest balance sheet figures are used insteadValue belonging to shareholdersValue belonging to debt holdersAggregate value(AV)*Net debt*Equity valueIn mergers,ownership shares are based on equity-valueA DCF valuation yields the aggregate

10、 valueIf a company is listed,market capitalization equals the equity valueEquity value is the combined value of the sharesBe careful not to confuse book value of equity with Equity value=Short term interest-bearing debt+Long term interest-bearing debt+Minorities interest+Preferred stock+Capitalized

11、leases-Cash and cash equivalents 4010420_Valuation_Beginners_Guide_FCP007CPTHE CALCULATION OF AGGREGATE VALUE IS BASED ON A NUMBER OF KEY PARAMETERS ParameterDefinitionHow/where to find it?SalesIncome received in exchange for goods and servicesIncome statement(P&L)EBITDAEarnings before interest and

12、taxes,depreciation and amortizationEBIT+depreciation and amortizationEBITEarnings before interest and taxesIncome statementDepreciationAmortization of fixed assets to allocate cost over their depreciable lifeIncome statement or cash flow statementAmortizationAmortization of intangibles assets to all

13、ocate cost over their depreciable lifeIncome statement or cash flow statementCapital expenditure(CAPEX)Outlay of money to acquire or improve capital assets such as buildings and machineryCash flow statement or notes to balance sheetWorking capitalCurrent assets(e.g.accounts receivables,inventories,o

14、ther current assets)minus current liabilities(e.g.trade creditors,other current liabilities)Balance sheet or notes to balance sheetBetaA measure of the companys volatility compared to the market portfolio(systematic risk)Needs to be calculated.Described in more detail later in this documentLeverageG

15、earing of the company.Net debt divided by market valueNet debt can be calculated from latest balance sheet.Example of leverage-ratio calculation will followWACC(Weighted Average Cost of Capital)Rate at which free cash flows are discounted back to valuation dateNeeds to be calculated.Examples will fo

16、llowFree Cash Flow(FCF)After tax cash flow generated by the company that is available to debt holders and shareholdersNeeds to be calculated.Example will follow5010420_Valuation_Beginners_Guide_FCP007CPEBIT IS A FUNDAMENTAL PARAMETER WHEN CALCULATING THE VALUE OF A COMPANYAggregate value(AV)Net debt

17、Equity valueDebt holdersShareholdersGovernmentInterestTaxNet incomeSharesSharesSharesEarnings before interest and taxes(EBIT)EBIT is an earnings flow available to all capital providers6010420_Valuation_Beginners_Guide_FCP007CPVALUATION METHODOLOGIESMethodologyMarkets rationale510 year DCF modelFunda

18、mental analysis of targets economics and growth/profitability prospectsAdherence to the theoretical principle that the value of a business depends on its future generation of after-tax cash flows.Equity research analysts invest time in building“fundamental”economic models of the companies they cover

19、 to link(to the extent possible)value to operations and to required capital expenditure for like-for-like growthDCF(Discounted Cash Flow)Precedent transactionsAverage/median of multiples paid in(recent)transactions of comparable size and nature,e.g.:AV*/SalesAV*/EBITDAAV*/EBITThe assumption is that

20、M&A acquirers are rational decision-makers when they close deals.In essence,it is a quantitative way to guessestimate the conditions under which,should one seek an alternative solution to the one under investigation,the target would be valued on the M&A marketOnce again,the search for benchmarks.Sim

21、ilar transactions(in spirit,sector and geographies)may be relevant ones2.Multiples at which acquirers have closed recent actual acquisitions perceived as comparableMultiples analysis1.Average/median of“traded comparables”forward multiples,e.g.:AV*/SalesAV*/EBITDAAV*/EBITThe assumption is that stock

22、exchanges price assets fairly(“the market is always king”)using all information available in the public domainSearch for“objective“market-based benchmarks.Similar companies,possibly also in similar geographies,may be relevant onesMultiples at which listed companies,perceived as comparable,trade on t

23、he stock marketTrading multiplesNote that alternative methodologies exist,e.g.private equity firms often use leveraged buy-out(LBO)analysis.These methodologies are not covered in this presentation*Aggregate value7010420_Valuation_Beginners_Guide_FCP007CPOVERALL VALUATION IS BASED ON MULTIPLE VALUATI

24、ON METHODOLOGIES AND SCENARIOSDCF valuationMultiples valuationSales(0.4-0.6x)EBIT(10.0-12.0 x)EBITDA(6.5-7.5x)Valuation rangePrecedent transactions(10.0-12.0 x)Downside case*:WACC 6.07.0%Management case*:WACC 6.07.0%1,8009001,5001,4002,1005006001,0007001,1001,400600Terminal growth rate 1.52.5%Termin

25、al growth rate 1.52.5%*Normally,a DCF valuation will be made based on managements own forecasts.The downside case will usually be a less optimistic case1,2001,200The valuation range is based on intervals from the different methodologies and scenarios.To some extent,the range is subjectively selected

26、EXAMPLE8010420_Valuation_Beginners_Guide_FCP007CPKEY HISTORICAL PARAMETERS CAN BE FOUND IN ANNUAL REPORTSSales-Cost of goods sold(COGS)=Gross profit-Operating expenses=EBIT-interest=Profit before tax-tax=Net incomeEBIT+Depreciation and amortization=EBITDA19972000Depending on statement type,depre-cia

27、tion and amortization can be“hidden”here.It can usually also be found in the cash flow statementHistorical figures are used as a base to ensure reasonable forecasts199819991,000600400200200201805013020050250(Example)9010420_Valuation_Beginners_Guide_FCP007CPOTHER PARAMETERS NEEDED IN A VALUATION PRO

28、CESS CAN BE FOUND USING VARIOUS SOURCESNecessary parameterNeeded in DCFMultiples analysisPossible sourceForecasts for EBIT for comparable companiesBroker reportsForecasts for EBITDA for comparable companiesBroker reportsForecasts for sales for comparable companiesBroker reportsMarket capitalization/

29、value for comparable companiesBloomberg or Datastream(or share price multiplied by outstanding shares)Book value for comparable companiesBalance sheetsNet debt for comparable companiesLatest balance sheets(homepages or databases)Levered beta for comparable companiesBARRA database(consult with CF&S R

30、&I)Capital structure for comparable companiesCalculated from market capitalization/value and net debtRisk free rateBloomberg has rates on government bondsMarket risk premiumAsk CF&S R&I for current premium(it is 5%at time of writing)Tax rateBloomberg10010420_Valuation_Beginners_Guide_FCP007CPCONTENT

31、SBeliefs and key learnings about DCFOverview of DCF calculationThe four steps of the DCF processSample DCF calculationDCF valuationMultiples valuationIntroduction to valuation11010420_Valuation_Beginners_Guide_FCP007CPOUR BELIEFS AND KEY LEARNINGS ABOUT DCFTime consumingForecasting operational numbe

32、rs 5-10 years into the future is very time consuming for most organizationsBasic data is rarely readily availableIdentifying levers/initiatives to drive improvement is difficult and requires deep understanding of businessDo not let the client do the forecasts on their ownGetting client people who kn

33、ow the levers and are analytical is more important than involving people with a deep understanding of the businessBeliefWhyImplicationOpen to manipulationPotential improvement can almost always be documented with reference to best practiceDCF is likely to be at high level so inconsistencies can be h

34、iddenLink between income statement,cash flows and DCF calculation makes it possible to e.g.make conservative EBIT forecast but drive free cash flow up dramatically(and value)Test rigorously for obvious inconsistency,e.g.,test for consistency between personnel numbers and salary costs Ensure that for

35、ecasts are linked to historical performanceComplement DCF with explicit assumptions(e.g.price development,market size)Ensure all parties(e.g.buyers,sellers,merger-partners)agree on format(e.g.forecasts should be comparable)before developing forecastDiscloses managements beliefs and business focusMan

36、agement is forced to quantify improvement programs Forecast will show how management thinks about the market,levers for building the business and in which areas improvements can be achievedBuild forecast and management presentation simultaneouslyUse workshops to identify levers and broad initiatives

37、;quantify afterwards12010420_Valuation_Beginners_Guide_FCP007CPOVERVIEW OF THE DCF CALCULATIONNet debtEquity valueFor every year in the forecast period,the free cash flow is calculated and discounted back to the time of valuationThe last year of the forecast period should be a”normalized”year with s

38、table cash flow elements,e.g.EBIT,CAPEX,etc.WACC=XX%AVThe terminal growth rate is used to grow the free cash flow in the last year of the forecast period into perpetuityFree cash flow is discounted at WACCAV is the net present value of future free cash flows01234Terminal growth rate=XX%The last year

39、 of the forecast period is also used as the basis for the calculation of terminal valueTerminal value+13010420_Valuation_Beginners_Guide_FCP007CPTHE DCF PROCES CONSISTS OF 4 STEPSDiscounting cash flowsForecastFree cash flow calculationWACC calculation and terminal value+14010420_Valuation_Beginners_

40、Guide_FCP007CPBUILDING THE BASICS FOR A BULLET PROOF FORECASTHistorical developments for all elements of the forecasts(e.g.cost of goods sold,personnel costs)are required to demonstrate that the starting point is realisticForecasts need to be tested with key managers in a format they can relate toUs

41、e budget values for year 1 if at all possible as this normally has good supporting data and action plansKey parameters in the forecast(e.g.EBIT)should line up with published figures to reduce suspicions of manipulation and allow for consistency checksAnchor forecast to known definitions and reportin

42、g formatsIdentify 5-10 levers that will drive EBITQuantify impact of specific improvements for each lever over the full DCF period based on historical evidence or best practice within the industryDevelop short profiles of programs to drive improvements for each leverIdentify key levers to drive impr

43、ovementsWork through each lever and discuss size of improvement Review ways of documenting that improvement is achievableDiscuss how to present improvement,in particular what level of detail is required to describe improvement programTest improvements with management15010420_Valuation_Beginners_Guid

44、e_FCP007CPExpand number of storesRemodel storesImprove sales per customerAssortment developmentAllocation of spaceExecution of in-store promotionsStock-out reductionEtc.Increase number of customers per storeMarketingPricingNew assortments/servicesEtc.2001Better space allocationEXAMPLE:FORECASTING RE

45、VENUES FOR A RETAILER2005EUR millionsPotential levers to drive revenuesNew storesMarket growthRevenue forecastChosen leversForecast can be broken down by lever and impact from each lever is backed by previous results and/or references to best practice16010420_Valuation_Beginners_Guide_FCP007CPSAMPLE

46、 INCOME STATEMENT FORECASTEUR millionsSales-COGS=Gross profit-Operating expenses=EBIT-interest=Profit before tax-tax=Net incomeEBIT+Depreciation and amortization=EBITDA20062007200820092010200120022003200420054,555.64,722.24,888.95,055.65,222.23,458.03,560.33,830.34,108.34,399.33,335.43,458.33,579.23

47、,700.03,820.82,558.22,628.42,818.73,014.23,222.31,220.11,263.91,309.71,355.61,401.4899.8931.91,011.71,094.21,177.01,111.81,152.81,193.11,233.31,273.6852.7876.1939.61,004.71,074.1108.3111.1116.7122.2127.847.155.872.189.4102.96.15.65.65.65.612.411.811.29.36.6102.2105.6111.1116.7122.234.744.060.980.196

48、.333.634.436.237.939.614.617.322.427.731.968.671.174.978.882.620.126.738.552.464.4108.3111.1116.7122.2127.847.155.872.189.4102.960.060.661.162.863.350.155.858.459.459.3168.3171.7177.8185.0191.197.2111.6130.6148.9162.217010420_Valuation_Beginners_Guide_FCP007CPSAMPLE FREE CASH FLOW FORECASTEUR millio

49、ns-Tax*31%=Unlevered*net income+Depreciation and amortization(D&A)-Capital expenditure-Change in working capital=Unlevered*free cash flow2005200620072008200920102001200220032004EBIT*Note that in some countries amortization is not tax deductible,i.e.,tax is paid on EBIT+amortization*Unlevered means r

50、egardless of capital structure(note that interest expense is not deducted).Capital structure affects value only through its impact on the WACC102.9108.3111.1116.7122.2127.847.155.872.189.431.933.634.436.237.939.614.617.322.427.771.074.876.780.584.388.232.538.549.861.759.360.060.661.162.863.350.155.8