This document summarizes key points from a valuation seminar in Japanese. It discusses various topics related to valuation including foundations of value, core valuation techniques, intrinsic value and the stock market, and managing for value. Some of the main points discussed include defining value, the relationship between growth, return on invested capital and value, discounted cash flow models, and how companies can create value through strategic portfolio management, performance management, mergers and acquisitions, and capital structure decisions.
Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This presentation outlines the best policies and practices for Board Members, Finance Committee Members and other volunteer stewards of nonprofit investments.
Organizational velocity improving speed, efficiency & effectiveness of busi...STRATICX
Lack of efficiency and effectiveness in an organization can have a significant impact on the overall cost of operation.
Organizational Velocity - Improving Speed, Efficiency & Effectiveness of Business provides a framework for diagnosing, assessing and implementing to improve the speed at which the organization operates.
There are two main areas for focus:
1. Process Audits - a framework for assessing key processes within the different functions of the organization and detailing where improvements are to be had
2. Workload Analysis - based on a workforce survey to identity where and what time in the organization is spent doing, including the efficiency and effectiveness of Meetings
The outcome from using the PPT framework will be a prioritised list of initiatives for implementation to increase organizational speed and reduce the cost of operation.
Creating Value Through Financial Management.Zil Shah
The ultimate objective of financial management is value creation.
A business proposal creates value only if its net present value is positive.
The fundamental finance principle can be applied to major corporate decisions
Profit is essential for a firm to sustain long-term growth.
Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This presentation outlines the best policies and practices for Board Members, Finance Committee Members and other volunteer stewards of nonprofit investments.
Organizational velocity improving speed, efficiency & effectiveness of busi...STRATICX
Lack of efficiency and effectiveness in an organization can have a significant impact on the overall cost of operation.
Organizational Velocity - Improving Speed, Efficiency & Effectiveness of Business provides a framework for diagnosing, assessing and implementing to improve the speed at which the organization operates.
There are two main areas for focus:
1. Process Audits - a framework for assessing key processes within the different functions of the organization and detailing where improvements are to be had
2. Workload Analysis - based on a workforce survey to identity where and what time in the organization is spent doing, including the efficiency and effectiveness of Meetings
The outcome from using the PPT framework will be a prioritised list of initiatives for implementation to increase organizational speed and reduce the cost of operation.
Creating Value Through Financial Management.Zil Shah
The ultimate objective of financial management is value creation.
A business proposal creates value only if its net present value is positive.
The fundamental finance principle can be applied to major corporate decisions
Profit is essential for a firm to sustain long-term growth.
Management consultant toolkit in Powerpoint & Excel created by ex-Deloitte & McKinsey Consultants. Huge time saver.
Download the toolkit at www.slidebooks.com
Mercer Capital | Best Practices: Fair Value ManagementMercer Capital
Topics include: Best Practices for Valuing Illiquid Portfolio Assets, Fair Value Measurement, Valuation Methods, Valuing Fund Interests, Mezzanine Loans, GIPS Valuation Hierarchy, International Private Equity and Venture Capital Valuation Guidelines (December 2012), CFA Institute Global Investment Performance Standards (2010)
Complete guide to Building an Acquistion Strategy and Valuation MethodologiesSTRATICX
DESCRIPTION
For a business any business looking to engage in acquisition activity it is critical to understand what your strategy is. Acquisition and investment is more than a financial exercise, there has to be a strategy intent as well.
This document is in three main sections to help formulating an acquisition strategy:
1. Identifying the Acquisition Target and Process
2. Diligencing the Target
3. Evaluating Other Strategic Considerations
Followed by a overview of valuation methodologies commonly used to value targets:
1. Public Market Comparables
2. Merger Market Comparables
3. DCF
4. Pro Forma
This powerpoint is designed to give a good foundations and building blocks for those interesting in learning more about the above techniques.
Fundamental Principles of Portfolio and Investment Management Analysis Lesa Cote
Portfolio and Investment Management is a technique to make decisions for business growth by considering objectives and balancing risk against performance.
The Age of Alignment Part III: Moving From Theory to PracticePearl Meyer
This series is designed to explore a fundamental question that was raised by the NACD Blue Ribbon Commission on Strategy Development: “Does your company’s incentive structure reinforce or unintentionally undermine its chosen strategy?”
Parts 1 and 2 – which are available for replay – outlined a number of diagnostic tools and approaches that boards can use to uncover potential misalignment between their strategy and the compensation program design. We’ve also looked at various protocols that can help improve alignment and drive toward desired goals.
As we know – protocols cannot anticipate every situation. The fresh news on the proposed SEC rules regarding pay for performance disclosure is a perfect example!
I’m joined today by Jim Heim and Theo Sharp, both managing directors in the Boston office of Pearl Meyer and Partners and today we’re going to talk about some real-world examples that show how companies have put these smart theories and protocols into practice and how they’ve remained disciplined toward strategy execution but also flexible to accommodate the unexpected.
Financial Metrics to Drive Strategic Portfolio Performance Sopheon
While all companies forecast the financial impact of their new product development investments, not all realize that the specific metrics that are used to rank and select projects heavily influence the performance of portfolios, possibly towards an unintended outcome.
This webinar explores typical project and portfolio valuation metrics with respect to what these metrics specifically indicate, and the decision-making behaviors they drive.
Given that the most successful portfolios are guided by a focused innovation strategy, which metrics should your organization be using to measure and maximize investment performance?
During this session you will learn:
How to choose the right financial metrics to drive your innovation strategy
Understand the unintended consequences of picking the wrong financial metrics
How financial metrics drive different decision-making behavior.
View the webinar in its entirety at: http://budurl.com/ld4g
Hello, this slide will take you through the essentials of financial report, Fundamental concepts of Balance Sheet, Profit & Loss, Cash Flow, Ratio Analysis etc. For a detailed course please visit https://excelfinanceacademy.zenler.com/
In this Business Analysis Training session, you will learn developing a business case. Topics covered in this session are:
• Why do we develop Business cases?
• Key components of a Business case
• Importance of identifying Benefits
• Role of the Business Analyst
• How we can integrate Benefits to the business case
• Setting the foundation for the rest of the project
• Questions & Answers
To learn more about this course, visit this link: https://www.mindsmapped.com/courses/business-analysis/business-analysis-fundamentals-with-hands-on-training/
In this Business Analysis training session, you will learn about Developing a Business Case. Topics covered in this session are:
• Why do we develop Business cases?
• Key components of a Business case
• Importance of identifying Benefits
• Role of the Business Analyst
• How we can integrate Benefits to the business case
• Setting the foundation for the rest of the project
• Questions & Answers
For more information, click here: https://www.mindsmapped.com/courses/business-analysis/business-analysis-training-for-beginners-as-per-babok-v3/
Capital raising activity is ever changing. Asset managers are looking for new ways to raise capital and push the boundaries as greater pressure is placed on traditional models.
The desire to increase hold periods, lower the cost of capital, alter and diversify investment strategies, and provide liquidity for investors has caused managers to reprioritize long-term business objectives. Indeed, permanent capital and other specialty finance structures, which were once considered non-conventional in the industry, have become a common discussion point for asset managers that are evaluating the strategy of their next fundraising effort.
Our panel will discuss the range of various permanent capital structures, including Permanent Capital Acquisition Partnerships (PCAPs), Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs), YieldCos, Special Purpose Acquisition Companies (SPACs), Public Asset Managers, Business Development Companies (BDCs), Closed End Funds, Interval Funds, and Variable Annuity and Variable Life Funds. We will also discuss various issues associated with these products, including:
• Strategic comparison of structures;
• Market trends and investor base;
• Distribution requirements;
• Tax consequences; and
• Regulatory requirements.
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
3. Contents
• Part1 Foundations of Value
• Part2 Core Valuation Techniques
• Part3 Intrinsic Value and the Stock Market
• Part4 Managing for Value
• Part5 Advanced Valuations Issues
• Part6 Special Situations
3
5. Contents
• Part1 Foundations of Value
• Part2 Core Valuation Techniques
• Part3 Intrinsic Value and the Stock Market
• Part4 Managing for Value
• Part5 Advanced Valuations Issues
• Part6 Special Situations
5
6. What
is
value
In
the
context
of
valua3on
and
in
your
life
?
6
7. What is Value?
• Value is defining dimension of measurement in a market
economy.
• Value is a particularly helpful measure of performance because
it takes into account the long-term interests of all the
stakeholders in a company,not just shareholders.
• Competition among value-focused companies also helps to
ensure that capital,human capital,and natural resources are
used efficiency across the economy,leading to higher living
standards for everyone.
(P3)
7
8. Fundamental principles of corporate finance
Companies create value by investing capital to
generate future cash flow at rate of return that
exceed their cost of capital. (P17)
8
9. Two core principles of value creation
• The combination of growth and return on invested
capital(ROIC) relative to its cost is what drives
value.
– Companies can sustain strong growth and high returns
on invested capital only if they have a well-defined
competitive advantage.
• Conservation of value
– Anything that doesn't increase cash flow doesn't create
value.
– M・M
theory
(P4)
9
10. Growth and ROIC:Drives of Value
Return on
investment capital
Cash flow
Revenue growth
Value
Cost of of Capital
10
11. Contents
• Part1 Foundations of Value
• Part2 Core Valuation Techniques
• Part3 Intrinsic Value and the Stock Market
• Part4 Managing for Value
• Part5 Advanced Valuations Issues
• Part6 Special Situations
11
12. Part2 Core Valuation Techniques
6. Framework for Valuation
7. Reorganizing the Financial Statements
8. Analysand Performance and Competitive Position
9. Forecasting Performance
10. Estimating Continuing Value
11. Estimating the Cost of Capital
12. Moving from Enterprise Value to per Share
13. Calculating and Interpreting Results
14. Using Multiple
12
13. Framework for DCF-Based Valuation
EXHIBIT 6.1 (P104)
Model
Measure
Discount factor
Assessment
Enterprise discounted
cash flow
Free cash flow
Weighted average
cost of capital
Works best for projects, business units, and
companies that manage their capital
structure to a target level.
Discounted economic
profit
Economic profit
Weighted average
cost of capital
Explicity highlights when a company creates
value.
Adjusted present value
Free cash flow
Unlevered cost of
equity
Highlights changing capital structure more
easily than WACC-based models.
Capital cash flow
Capital cash flow
Unlevered cost of
equity
Compresses free cash flow correctly
because capital structure is embedded
within the cash flow.Best used when valuing
financial institutions.
Equity cash flow
Cash flow to
equity
Levered cost of
equity
Difficult to implement correctly because
capital structure is embedded within the
cash flow. Best used when valuing financial
institutions.
13
14. Home Depot:
Enterprise DCF
Forcaset year
Free cash flow
($ million)
Discount factor
(@ 8.5%)
2009
5,909
2010
2,368
2011
1,921
2012
2,261
2013
2,854
2014
3,074
2015
3,308
2016
3,544
2017
3,783
2018
4,022
Continuing value
92,239
Present value of cash flow
Forecasting performance
Estimating Continuing Value
0.922
0.850
0.784
0.723
0.666
0.614
0.567
0.522
0.482
0.444
0.444
Present value of
FCF
(& million)
5,448
2,013
1,506
1,634
1,902
1,889
1,874
1,852
1,822
1,787
40,966
62,694
Midyear adjustment factor
Value of operations
1.041
65,291
Value of excess cash
Value of long-term investments
Value of tax loss carry-forwards
Enterprise value
361
112
65,764
Less:Value of debt
Less:Value of capitalized operating leases
Equity value
Number of shares outstanding(December 2008)
Equity value per share
(11,434)
(8,298)
46,032
1.7
27.1
14
15. Enterprise valuation of
a multibusiness company
Exhibit6.3 P106
225
30
40
560
200
520
360
125
200
Unit A
Unit B
Unit C
Corporate
center
Value of
Nonoperating
Enterprise
operations
assets
Value
Value
of debt
Value of operating units
Equity
Value
15
16. Contents
• Part1 Foundations of Value
• Part2 Core Valuation Techniques
• Part3 Intrinsic Value and the Stock Market
• Part4 Managing for Value
• Part5 Advanced Valuations Issues
• Part6 Special Situations
16
17. Part3 Intrinsic Value and the Stock Market
15 Market value tracks return on invested capital and growth
16 Markets value substance, not form
17 Emotions and mispricing in the markets
18 Investors and managers in efficient markets
17
18. Research Findings
• Valuation levels for the stock market as a whole clearly reflect the
underlying fundamental performance of companies in the real
economy.
• Companies with higher ROIC and those with higher growth are
valued more highly in the stock market.
• Over the long term(10 years and more), higher ROIC and growth
also lead to higher total returns to shareholders(TSR) in the stock
market.
• Whether increasing revenue growth or return on capital will create
more value depends on the company’s performance.
18
19. Markets value substance, not form
• Managers can go to great lengths to achieve analysts’ expectations
of EPS or to smooth earnings from quarter to quarter.
• Stock markets are perfectly capable of seeing the economic reality
behind different forms of accounting information.
• Since investors value substance over form, managers need not
worry about whether their share are spilt into smaller shares, traded
in one or many developed stock markets, or included in a large
stock market index.
19
20. Patterns in mispricing
• Individual company share price deviate significantly from
the company’s fundamentals value only in rare
circumstances.
• Market wide price deviations from fundamental
valuations are even less frequent, although they may
appear to be becoming more so.
• Price deviation from fundamentals are
temporary(typically three years).
20
21. The implication of market efficiency
for managers
• Managers should focus on driving return on ROIC and
growth to create maximum value for shareholders.
• Managers need to understand their investor base, so
they can communicate their company’s strategy for value
creation effectively to different investor segments.
• Managers should not be distracted from their efforts to
drive ROIC and growth by any short-term price volatility.
21
22. Contents
• Part1 Foundations of Value
• Part2 Core Valuation Techniques
• Part3 Intrinsic Value and the Stock Market
• Part4 Managing for Value
• Part5 Advanced Valuations Issues
• Part6 Special Situations
22
23. Part4 Managing for Value
• Chap19 Corporate Portfolio Strategy
• Chap20 Performance Management
• Chap21 Mergers and Acquisitions
• Chap22 Creating Value through Divestitures
• Chap23 Capital Structure
• Cahp24 Investor Communications
23
24. Part4 Managing for Value
• Chap19 Corporate Portfolio Strategy
• Chap20 Performance Management
• Chap21 Mergers and Acquisitions
• Chap22 Creating Value through Divestitures
• Chap23 Capital Structure
• Cahp24 Investor Communications
24
26. Managing for Value
• Part4 looks at value creation from a management perspective.
• At the heart of a company’s corporate strategy, its blue print for
creating value lie decisions about what businesses it should own.
• This chapter explains what makes the best owner for company and
how the corporations that qualify as best owner may change over
time.
26
27. What is corporate finance?
Asset Side
Capital market side
【2】Decision for finance
and capital structure
【1】Decision for
investment for
operation
•
•
•
•
financial evaluation for
project
allocation of resources
Arrange for project
portfolio
•
Decision for debt
equity ratio
Decision for finance
【3】Decision for payout
•
•
Decision for payout
ratio
Choose of payout and
share repurchase
野中郁次郎・楠木建(2013)『はじめての経営学』東洋経済
27
28. CEO, COO, and CFO
CEO
•
•
•
Mission, vision, Value
Final decision
leadership
COO
CFO
•
•
Management of whole
project operation
•
•
•
Decision for project
investment
Decision for finance and
capital structure
Decision for payout
Communication with
investor
野中郁次郎・楠木建(2013)『はじめての経営学』東洋経済
28
30. Better owner
• To identify the best owner of a business in any given industry
circumstances, you first have to understand the sources of value on
which potential new owners might draw.
• The most straight forward way that owners add value is through
links to other businesses within their portfolio.
• Better owner may have distinctive functional or managerial skills
from which the new business can benefit.
• Better governance refers to the way company’s owners interact with
the management team to create maximum value in the long term.
30
31. The best owner life cycle
• At each stage of the company’s life, each best owner took actions to
increase the company’s cash flows, thereby adding value.
ü In the United States, most large companies either listed or owned by
private equity funds.
ü In Europe, government ownership plays important role.
ü In Asia and South America, large companies are often controlled for
several generations by members of their founding families, and
family relationship also creates ownership links between different
businesses.
31
32. Constantly evolving portfolio of business
• Applying the best-owner sequence, executives must continually look
for and acquire companies where they could be the best owner,
• Executives also must divest business where they used to be the
best owner but that another company could now own better.
• The research shows that the stock market consistently reacts
positively to divestitures, both sales and spin-offs.
32
33. Constructing the portfolio
1.
Determine the company’s current market value, and compare it with the
company’s value as is.
2.
Identify and value opportunities to improve operations internally.
–
By increasing margins, accelerating core revenue growth, and improving capital efficiency.
3.
Evaluate whether some business should be divested.
4.
Identify potential acquisitions or other initiatives to create new growth, and
improving on value.
5.
Estimate how the company’s value might be increased through changes in
its capital structure or other financial strategy changes.
33
36. The myth of diversification
•
Our perspective is that diversification is intrinsically neither good nor bad:
– We haven’t found any evidence that diversified companies actually generate smoother cash
flows.
– We almost never find that the value of the sum of a diversified company’s business units is
substantially different from the market value of the consolidated company.
– We’ve never come across diversified companies that systematically used more debt than
their peers.
•
It depends on whether the parent company adds more value to the business
it owns than any other potential owner could, making it the best owner of
those business in the circumstance.
•
Substantially changing the shapes of a portfolio of real business involves a
diversified company in considerable transaction costs of and disruption, and
it typically takes many years.
– Investors can diversify their portfolio at lower cost than companies.
36
37. Part4 Managing for Value
• Chap19 Corporate Portfolio Strategy
• Chap20 Performance Management
• Chap21 Mergers and Acquisitions
• Chap22 Creating Value through Divestitures
• Chap23 Capital Structure
• Cahp24 Investor Communications
37
39. Performance Management
• The overall value that a company creates is the sum of the
outcomes of innumerable business decision taken by its managers
and staff.
• Performance management systems include
–
–
–
–
–
long-term strategic plans
short-term budgets
capital budgeting systems
performance reporting and reviews
compensation frameworks
39
40. The success or failure of performance
• Do the senior management team members really understand the
economics of the business unit oversee?
• Can they negotiate performance targets that are both challenging
and achievable?
• Are trade-offs between the short term and the long term
transparent?
• Are managers sufficiently rewarded for focusing on long term value?
40
42. Short term value drivers
• Short-term value drivers are the immediate drivers of historical ROIC
and growth.
Sales productivity
The drivers of recent sales growth, such as price and
quantity sold, market share, the company’s ability to
charge higher prices relative to peers, sales force
productivity
Operating cost
productivity
The drivers of unit costs, such as the component
costs for building an automobile or delivering a
package.
Capital
productivity
How well a company uses its working
capital(inventories, receivables, and payables) and
its property, plant , and equipment
42
43. Medium-term value drivers
• Medium-term value drivers look forward to indicate whether a
company can maintain and improve its growth and ROIC.
Commercial
health
Whether the company can sustain or improve its
current revenue growth.
The company’s product pipeline, brand strength,
customer satisfaction
Cost structure
health
Company’s ability to manage its costs relative to
competitors over three to five years.
Asset health
How well a company maintains and develops its
assets.
43
44. Long term strategic value drivers
and Organizational health
• Long term strategic value drivers
– The ability of an enterprise to sustain its current operating
activities and to identify and exploit new growth areas.
• Organizational health
– Whether the company has the people, skills, and culture to
sustain and improvement
44
48. Summary medium term value tree:
Temporary-help company, new geographic markets
P438
48
49. Organizational support
• The following ingredients lead to more effective organizational
support for corrective action.
Buy in to
performance
management at all
levels
Companies that succeed at performance
management instill a value-creating mind-set
throughout the business. Their employees at all
levels understand core levels of value creation.
Motivating targets
Managers and staff responsible for meeting targets
need to be involved in setting them, so they
understand the targets’ purpose and will strive to
deliver them.
Fact based
performance
reviews
The best way to record facts for performance reviews
is on a scorecard incorporating the key value metrics
from the value driver analysis.
Appropriate rewards
Linking stock-based compensation to the specific
performance of the company. Linking bonus as much
to long term company.
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50. Part4 Managing for Value
• Chap19 Corporate Portfolio Strategy
• Chap20 Performance Management
• Chap21 Mergers and Acquisitions
• Chap22 Creating Value through Divestitures
• Chap23 Capital Structure
• Cahp24 Investor Communications
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52. Value creation framework
• Acquisitions create value when the cash flows of combined
companies are greater than they would have otherwise been.
Value Created for Acquirer= Value received – Priced Paid
Value Created for Acquirer= (Standard Alone value of target)
+Value of performance improvements)
−(Market Value of target+Acquisition premium)
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54. Selected Acquisitions:
Significant Improvements
•
•
The performance improvements were substantial, typically in excess of 50%
of the value of the target.
Kellogg and PepsiCo paid unusually low premiums for their acquisitions,
allowing them to capture more value.
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55. Empirical Results
• Researchers have shown that acquisitions collectively do create
value for the shareholders of both the acquire and the acquired
company.
– According to the McKinsey, the combined value of the acquirer and target
increased by about 4% on average.
• However, the evidence is also overwhelming that acquisitions do not
create much if any value for the acquiring company’s shareholders.
– Empirical study find that the value- weighted average deal lower the acquirer’s
stock price between 1 and 3%.
• It comes as no surprise to find conclusive evidence that most or all
of the value creation from acquisitions accrues to the shareholders
of the target company.
– Since the target shareholder are receiving high premiums over their stock’s
preannouncement market price- typically about 30%.
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56. Successful specific factors
for acquirer’s shareholder
Non important
factor
Strong operators are more successful
Low transaction premiums are better
Being the sole bidder helps
•
•
Important factor
•
•
•
Size of the acquirer relative to the target
Whether the transaction increases or
dilutes earnings per share
P/E ratio of the acquirer relative to the
target’s P/E
The relatedness of the acquirer and
target, based on SIC
•
•
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57. Archetypes for value creating acquisitions
1. Improve the performance of the target company
2. Consolidate to remove excess capacity from an industry.
3. Create market access for the target’s products.
4. Acquire skills or technologies more quickly or at lower cost than
they could be built in house.
5. Pick winners early and help them develop business.
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58. More difficult strategies for creating value
from acquisitions
• Roll-up strategy
• Consolidate to improve competitive behavior
• Enter into a transformation merger
• Buy Cheap
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59. Estimation of operating improvements
The analysis for estimating cost savings should be structured using the
following four steps.
1. Develop an industry-specific business system.
2. Develop a baseline for costs as if the two companies remained independent.
Make sure the baseline costs are consistent with the intrinsic valuations.
3. Estimate the savings for each cost category based on the expertise of
experienced line managers.
4. Compare resulting aggregate improvements with margin and capital
efficiency benchmarks for the industry, to judge whether the estimates are
realistic given industry economics.
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60. Sample framework
for estimating cost saving
Function
Example savings
Research and Development
・Stopping redundant projects
・Eliminating overlap in research personal
・Developing new products through transferred technology
Procurement
・Pooled purchasing
・Stndardizing products
Manufacturing
Sales and Marketing
・Eliminating overcapacity
・Transferring best operating practice
・Cross-selling products
・Using common channels
・Transferring best practice
・Lowering combined marketing budget
Distribution
・Consolidating warehouses and truck routes
Administration
・Exploiting economies of scale in finance/accounting and
other back-office functions
・ Consolidating strategy and leadership functions
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62. Estimating Revenue Improvements
Revenue improvements will come from one or more of four sources.
1. Increasing each product’s peak sales level.
2. Reaching the increased peak level faster
3. Extending each product’s life
4. Adding new products(or features) that could not have been
developed if the two companies had remained independent.
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63. Evaluating the quality and accuracy of
improvements estimates
• According to McKinsey’s
Merger Management, 86% of
the acquires were able to
capture at least 70% of the
estimated cost savings.
• In contrast almost half of the
acquirers realized less than
70% of the target revenue
improvements, and in almost
¼ of the observed
acquisitions, the acquirer
realized 30% of the targeted
revenue improvements.
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64. How to pay:
in cash or stock?
• Research evidence shows that an acquirer’s stock returns
surrounding the acquisition announcement are higher when the
acquire offers cash than when it offers shares.
• When the acquiring company pays in cash, shareholders carry the
entire risk of capturing synergies and paying too much.
– If the companies exchange shares, the target’s shareholders assume a portion of
the risk.
• When weighting whether to pay in cash or in shares, you should
also consider what your optimal capital structure will be.
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65. Focus on value creation, not accounting
• Stock markets pay no attention to the effects of an acquisition on
accounting numbers, but react only to the value that the deal is
estimated to create.
• Many acquisitions are earnings accretive but destroy value.
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66. Market reaction to EPS
impact of acquisitions
• Financial markets understand the priority of creating real value over
results presented in accounts.
• In a study of 117 U.S. transactions larger than $3 billion that took
place in 1999 and 2000, we found that earnings accretion or dilution
resulting from deals was not factor in the market’s reaction.
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