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Valuation for Mergers and Acquisitions (2nd edition)

Valuation for Mergers and Acquisitions (2nd edition)

By: Barbara S. Petitt (author), Kenneth R. Ferris (author)Hardback

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Master the latest insights, lessons, and best practice techniques for accurately valuing companies for potential mergers, acquisitions, and restructurings. Concise, realistic, and easy to use, Valuation for Mergers and Acquisitions, Second Edition has been fully updated to reflect the field's latest and most useful "rules of thumb," compare every modern approach to valuation, offering practical solutions for today's most complex and important valuation challenges. Treating valuation as both an art and a science, it covers the entire process, offering up-to-the-minute real-world advice, examples, and case studies. Leading valuation experts Barbara S. Petitt and Kenneth R. Ferris introduce and compare leading techniques including discounted cash flow analysis, earnings multiples analysis, adjusted present value analysis, economic value analysis, and real option analysis. They fully address related concerns such as the accounting structure of deals, accounting for goodwill, tax considerations, and more. Throughout, they identify common errors that lead to inaccurate valuation, and show how to avoid them. From start to finish, this guide doesn't just make valuation comprehensible: it provides the tools and insight to make valuation work. For all financial professionals concerned with valuation, especially those involved in potential mergers, acquisitions, and restructurings; and for corporate finance instructors and students in Executive MBA programs concerned with valuation.

About Author

Barbara S. Petitt, PhD, CFA, is Director, Curriculum Projects, EMEA at CFA Institute. She has an in-depth knowledge of equity valuation, mergers, acquisitions, and corporate restructurings. She has held academic positions at Thunderbird, School of Global Management in the U.S., Bournemouth University in the U.K., and SKEMA Business School in France, and consulted with corporate clients throughout Europe and North America. Petitt resides in Poole, U.K.Kenneth R. Ferris, a valuation and acquisition consultant to small and mid-cap companies in Central America, served on the faculty at Northwestern's Kellogg School of Management; SMU's Cox School of Business; Thunderbird School of Global Management; Drucker School of Business at Claremont Graduate School, and Arizona State's W.P. Carey School of Business. He was a director for three NYSE-listed firms. Ferris resides in Placencia, Belize.Valuation for Mergers and Acquisitions 9780133372670 Front Matter, pg 1


Preface viiChapter 1 Valuation: An Overview 1Market View 11 Why Companies Merge or Acquire: A Historical Perspective 3 1.1 Mergers and Acquisitions Waves 3 1.2 Motivations for Mergers and Acquisitions 62 Do Mergers and Acquisitions Create Shareholder Value? 83 Merger and Acquisition Premiums 94 Valuation Process 105 Valuation Methods: An Overview 12 5.1 Relative Valuation Methods 14 5.2 Direct Valuation Methods 17 5.3 The Use of Valuation Methods 19Summary 20Endnotes 20Chapter 2 Financial Review and Pro Forma Analysis 23Market View 231 Financial Review 25 1.1 Ratio Analysis 26 1.2 Decomposition Analysis 321.3 Cash Flow Analysis 422 Pro Forma Analysis 49 2.1 Pro Forma Financial Statements 49 2.2 Sensitivity, Scenario, and Monte Carlo Simulation Analyses 59Summary 60Endnotes 61Appendix 2A: Mattel's Financial Statements 66Appendix 2B: Preparation of a Cash Flow Statement. . . . 69 Cash Flow Fundamentals 69 Summary 81Appendix 2C: Account Forecasting Alternatives 82Chapter 3 Traditional Valuation Methods 85Market View 851 Earnings Multiples 872 Discounted Cash Flow Models 92 2.1 Operational Dilemmas 92 2.2 Estimating the Entity Value and Equity Value 104 2.3 A Survey of Best Practices 108 2.4 Cross-Border Considerations 109 2.5 Illustration 111Summary 118Endnotes 119Appendix 3: Some Frequently Asked Questions and Answers About the Free Cash Flow to the Firm Model and Earnings Multiples 124Chapter 4 Alternative Valuation Methods 133Market View 1331 Relative Valuation Methods 136 1.1 Price Multiples 136 1.2 Enterprise Value Multiples 1412 Direct Valuation Methods 144 2.1 Discounted Cash Flow Models 144 2.2 Economic Income Models 158 2.3 Real Option Analysis 165Summary 170Endnotes 171Appendix 4: How to Use the Black-Scholes Model to Value a Red Option 176 Black-Scholes Model 177 Luehrman's NPVq/Cumulative Volatility Approach 178Chapter 5 Accounting Dilemmas in Valuation Analysis 181Market View 1811 Assessing Economic Reality 1832 Income Statement Transformations: Forecasting Permanent Earnings and Free Cash Flows 185 2.1 Recurring and Nonrecurring Events 185 2.2 Revenue Recognition Policy 186 2.3 Inventory Costing Policy 190 2.4 Depreciation Policy 1933 Balance Sheet Transformations: Forecasting the Equity Value of a Company 1953.1 Asset Capitalization Policy 196 3.2 Asset Revaluation Policy 199 3.3 Off-Balance-Sheet Debt 2004 Cash Flow Statement Transformations: Forecasting CFFO and Free Cash Flow 205Summary 206Endnotes 208Chapter 6 Financial Reporting and Tax Considerations for Mergers and Acquisitions 211Market View 2111 Financial Reporting: To Combine or Not to Combine? 2132 Consolidated Financial Reporting: Purchase Accounting 2143 Noncontrolling Interest 2184 Accounting for Goodwill 2205 Tax Considerations of Mergers and Acquisitions 2226 Tax Considerations of Goodwill 224Summary 225Endnotes 225Chapter 7 Some Final Thoughts 229Market View 2291 Valuation: A Debriefing 2302 Some Caveats to Consider 2313 Closure 233Endnote. 233Bibliography 235Index 239

Product Details

  • ISBN13: 9780133372670
  • Format: Hardback
  • Number Of Pages: 256
  • ID: 9780133372670
  • weight: 490
  • ISBN10: 0133372677
  • edition: 2nd edition

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