并购整合估价(ppt 36)
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➢ What is working capital?
Non-cash current assets - non-interest bearing current liabilities (e.g. A/P & accrued liab.)
Working Capital vs. Permanent Financing
➢ P/E (capitalization of earnings) ➢ Enterprise Value/EBITDA ➢ Other: P/CF, P/B, P/S ➢ Control transaction based models (e.g. value based on
acquisition premia of “similar” transactions)
$7,075 $6,719 $ 356 $ 169 $ 187 $ 97 $ 50 $ 40 $ 53
Cash flow from operations Net Income Non-cash expenses Changes in WC
Cash provided (used) by investments Additions to P,P & E
➢ The present value of future cash flows is referred to as:
➢ Value of the firm’s invested capital, or ➢ Value of “operating assets” or “Total Enterprise Value”
Key: Treat items as either working capital permanent capital but not both
FCFF vs. Accounting Cash Flows
Income Statement, Hudson’s Bay ($millions, FYE Jan 1999)
= uninvested capital + present value of cash flows from all future projects for the firm
➢ Note: This recognizes that not all capital may be
currently used to invest in projects
Measuring Cash Flows
➢ Free Cash Flow to the Firm (FCFF)
➢ represents cash flows to which all stakeholders make claim
FCFF = EBIT (1 - tax rate)
+ Depreciation and amortization (non cash items) - Capital Expenditures - Increase in Working Capital
➢ Dividend discount model ➢ Free cash flows to equity model (direct approach) ➢ Free cash flows to the firm model (indirect approach)
➢ Relative valuation approaches
Short-term assets
Short- term liabilities
Long-term assets
Permanent Capital
Working capital
Operating assets
Uninvested capital
Permanent Capital
Permanent capital may include “current” items such as bank loans if debt is likely to remain on the books
Discounted Cash Flow Valuation
➢ What cash flow to discount?
➢ Investors in stock receive dividends, or periodic cash distributions from the firm, and capital gains on re-sale of stock in future
➢ How do we establish value of assets? ➢ Objective today: To preview valuation methods used
most commonly in practice
Business Valuation Techniques
➢ Discounted cash flow (DCF) approaches
➢ assets not required (“redundant assets”) ➢ “excess” cash (not needed for day-to-day operations)
➢ Value of the firm’s equity
= Vequity = Vfirm - Vdebt
$ 259 $ 356 ($ 53) ($ 64)
Hudson’s Bay FCFF = 187 * (1- 0.44) + 169 - 719 - 116 = ($ 561)
Cash Flow Definition Issues
How is FCFF different than accounting cash flows?
Cash provided (used) by financing Additions (reductions) to debt Additions (reductions) to equity Dividends
Overall Net Cash Flows
$ 40 $ 169 ($116)
($719)
Vfirm = Vequity + Vdebt = TEV + cash TEV = Vequity + Vdebt - cash TEV = Vequity + Net debt
where Net debt is debt - cash (note: this assumes all cash is “excess”)
➢ Key: these tax savings are accounted for in WACC
An Example
➢ $1 million l structure:
➢ If investor buys and holds stock forever, all they receive are dividends
➢ In dividend discount model (DDM), analysts forecast future dividends for a company and discount at the required equity return
Source: A. Damodaran, Investment Valuation, Wiley, 1997
Valuation: Back to First Principles
➢ Value of the firm =
value of fixed claims (debt) + value of equity
Valuation
Valuation as a Tool
➢ We encounter valuation in many situations:
➢ Mergers & Acquisitions ➢ Leveraged Buy-outs (LBOs & MBOs) ➢ Sell-offs, spin-offs, divestitures ➢ Investors buying a minority interest in company ➢ Initial public offerings
➢ Operating cash flows includes interest paid
➢ We want to identify cash flows before they are allocated to claimholders
➢ FCFF also appears to miss tax savings due to debt
needs
➢ Tax factors ➢ Signaling
prerogatives
Dividend changes: Publicly traded U.S. Firms
90% 80% 70% 60% 50% 40% 30% 20% 10%
0% 1981
1984
1987
1990
1993
No Change Increase Decrease
The Valuation Process
➢ Identify cash flows available to all stakeholders
➢ Compute present value of cash flows
➢ Discount the cash flows at the firm’s weighted average cost of capital (WACC)
Cash Flow Statement, Hudson’s Bay, ($millions, FYE Jan 1999)
Sales Cost of Goods Sold EBITDA Depreciation EBIT Interest Expense Income Taxes Net Income Dividends
➢ Note: Market to book ratio (or “Tobin’s Q” ratio) >1 if
market expects firm to take on positive NPV projects (i.e. firm has significant “growth opportunities”)
(TEV)
The Valuation Process, continued
➢ Value of all the firm’s assets (or value of “the firm”)
= Vfirm = TEV + the value of uninvested capital
➢ Uninvested capital includes:
➢ Problem with dividends: they are “managed”
Dividends: The Stability Factor
Factors that influence dividends:
➢ Desire for stability ➢ Future investment
➢ How do managers add to equity value?
➢ By taking on projects with positive net present value (NPV)
➢ Equity value =
equity capital provided + NPV of future projects
Valuation: First Principles
➢ Total value of the firm
= debt capital provided + equity capital provided + NPV of all future projects project for the firm
where Vdebt is value of fixed obligations (primarily debt)
Total Enterprise Value (TEV)
➢ For most firms, the most significant item of uninvested
capital is cash
Non-cash current assets - non-interest bearing current liabilities (e.g. A/P & accrued liab.)
Working Capital vs. Permanent Financing
➢ P/E (capitalization of earnings) ➢ Enterprise Value/EBITDA ➢ Other: P/CF, P/B, P/S ➢ Control transaction based models (e.g. value based on
acquisition premia of “similar” transactions)
$7,075 $6,719 $ 356 $ 169 $ 187 $ 97 $ 50 $ 40 $ 53
Cash flow from operations Net Income Non-cash expenses Changes in WC
Cash provided (used) by investments Additions to P,P & E
➢ The present value of future cash flows is referred to as:
➢ Value of the firm’s invested capital, or ➢ Value of “operating assets” or “Total Enterprise Value”
Key: Treat items as either working capital permanent capital but not both
FCFF vs. Accounting Cash Flows
Income Statement, Hudson’s Bay ($millions, FYE Jan 1999)
= uninvested capital + present value of cash flows from all future projects for the firm
➢ Note: This recognizes that not all capital may be
currently used to invest in projects
Measuring Cash Flows
➢ Free Cash Flow to the Firm (FCFF)
➢ represents cash flows to which all stakeholders make claim
FCFF = EBIT (1 - tax rate)
+ Depreciation and amortization (non cash items) - Capital Expenditures - Increase in Working Capital
➢ Dividend discount model ➢ Free cash flows to equity model (direct approach) ➢ Free cash flows to the firm model (indirect approach)
➢ Relative valuation approaches
Short-term assets
Short- term liabilities
Long-term assets
Permanent Capital
Working capital
Operating assets
Uninvested capital
Permanent Capital
Permanent capital may include “current” items such as bank loans if debt is likely to remain on the books
Discounted Cash Flow Valuation
➢ What cash flow to discount?
➢ Investors in stock receive dividends, or periodic cash distributions from the firm, and capital gains on re-sale of stock in future
➢ How do we establish value of assets? ➢ Objective today: To preview valuation methods used
most commonly in practice
Business Valuation Techniques
➢ Discounted cash flow (DCF) approaches
➢ assets not required (“redundant assets”) ➢ “excess” cash (not needed for day-to-day operations)
➢ Value of the firm’s equity
= Vequity = Vfirm - Vdebt
$ 259 $ 356 ($ 53) ($ 64)
Hudson’s Bay FCFF = 187 * (1- 0.44) + 169 - 719 - 116 = ($ 561)
Cash Flow Definition Issues
How is FCFF different than accounting cash flows?
Cash provided (used) by financing Additions (reductions) to debt Additions (reductions) to equity Dividends
Overall Net Cash Flows
$ 40 $ 169 ($116)
($719)
Vfirm = Vequity + Vdebt = TEV + cash TEV = Vequity + Vdebt - cash TEV = Vequity + Net debt
where Net debt is debt - cash (note: this assumes all cash is “excess”)
➢ Key: these tax savings are accounted for in WACC
An Example
➢ $1 million l structure:
➢ If investor buys and holds stock forever, all they receive are dividends
➢ In dividend discount model (DDM), analysts forecast future dividends for a company and discount at the required equity return
Source: A. Damodaran, Investment Valuation, Wiley, 1997
Valuation: Back to First Principles
➢ Value of the firm =
value of fixed claims (debt) + value of equity
Valuation
Valuation as a Tool
➢ We encounter valuation in many situations:
➢ Mergers & Acquisitions ➢ Leveraged Buy-outs (LBOs & MBOs) ➢ Sell-offs, spin-offs, divestitures ➢ Investors buying a minority interest in company ➢ Initial public offerings
➢ Operating cash flows includes interest paid
➢ We want to identify cash flows before they are allocated to claimholders
➢ FCFF also appears to miss tax savings due to debt
needs
➢ Tax factors ➢ Signaling
prerogatives
Dividend changes: Publicly traded U.S. Firms
90% 80% 70% 60% 50% 40% 30% 20% 10%
0% 1981
1984
1987
1990
1993
No Change Increase Decrease
The Valuation Process
➢ Identify cash flows available to all stakeholders
➢ Compute present value of cash flows
➢ Discount the cash flows at the firm’s weighted average cost of capital (WACC)
Cash Flow Statement, Hudson’s Bay, ($millions, FYE Jan 1999)
Sales Cost of Goods Sold EBITDA Depreciation EBIT Interest Expense Income Taxes Net Income Dividends
➢ Note: Market to book ratio (or “Tobin’s Q” ratio) >1 if
market expects firm to take on positive NPV projects (i.e. firm has significant “growth opportunities”)
(TEV)
The Valuation Process, continued
➢ Value of all the firm’s assets (or value of “the firm”)
= Vfirm = TEV + the value of uninvested capital
➢ Uninvested capital includes:
➢ Problem with dividends: they are “managed”
Dividends: The Stability Factor
Factors that influence dividends:
➢ Desire for stability ➢ Future investment
➢ How do managers add to equity value?
➢ By taking on projects with positive net present value (NPV)
➢ Equity value =
equity capital provided + NPV of future projects
Valuation: First Principles
➢ Total value of the firm
= debt capital provided + equity capital provided + NPV of all future projects project for the firm
where Vdebt is value of fixed obligations (primarily debt)
Total Enterprise Value (TEV)
➢ For most firms, the most significant item of uninvested
capital is cash