This document discusses macro issues in valuation for mergers and acquisitions. It begins by defining valuation as determining the economic worth of an asset or company based on certain assumptions. It then discusses key valuation approaches such as income, market, and asset approaches. It also discusses factors that can cause valuations in M&A to depart from fair value, such as control premiums and synergies. Finally, it provides a case study showing how to calculate an exchange ratio in a merger between a listed steel company and unlisted power company based on valuations of both companies.
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on M&A Valuation and challenges at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016. Corporate Professionals acted as the event supporting partner.
• In case of a merger valuation, the emphasis is on arriving at the relative values of the shares of the merging companies to facilitate determination of the swap ratio, hence, the purpose is not to arrive at absolute values of the shares of the companies. The key issue to be addressed is that of fairness to all shareholders. There are established legal precedence for merger valuation methodologies:
• Valuer’s role is to incorporate case specific factors and use appropriate methodologies so as to determine a fair ratio
• Usually, best to give weight ages to valuation by all methods
• Market price method and Earnings methods dominate.
• It is observed that in case of M&A, the Valuations depart from the concept of “Fair Value” as elements like Distress Sale, Desperate Buy, Comparable Transaction Multiples come into play reflecting Price than Value.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on Valuation Principles & Techniques in Ind AS at a seminar organised by Gurgaon Branch of ICAI on 3rd September, 2016.
IndAS113 prescribes Fair Valuation definition, Techniques, Application and its Hierarchy. About 75% of the Balance Sheet Size is expected to change due to Fair Value Accounting (#IndAS109 #Financial Instruments, #IndAS102 #Share based payments, #IndAS16 Property Plant Equipments (PPE), #IndAS103 #Business combination etc. shall be impacted using #FairValue. Time to get ready, Plan Prepare and Align with the new requirements...
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
A Presentation given by Mr. Pavan Kumar Vijay, Past President, ICSI, Chairman-Secretarial Standards Board
on Corporate Governance through the eyes of Secretarial Standards.
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on M&A Valuation and challenges at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016. Corporate Professionals acted as the event supporting partner.
• In case of a merger valuation, the emphasis is on arriving at the relative values of the shares of the merging companies to facilitate determination of the swap ratio, hence, the purpose is not to arrive at absolute values of the shares of the companies. The key issue to be addressed is that of fairness to all shareholders. There are established legal precedence for merger valuation methodologies:
• Valuer’s role is to incorporate case specific factors and use appropriate methodologies so as to determine a fair ratio
• Usually, best to give weight ages to valuation by all methods
• Market price method and Earnings methods dominate.
• It is observed that in case of M&A, the Valuations depart from the concept of “Fair Value” as elements like Distress Sale, Desperate Buy, Comparable Transaction Multiples come into play reflecting Price than Value.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on Valuation Principles & Techniques in Ind AS at a seminar organised by Gurgaon Branch of ICAI on 3rd September, 2016.
IndAS113 prescribes Fair Valuation definition, Techniques, Application and its Hierarchy. About 75% of the Balance Sheet Size is expected to change due to Fair Value Accounting (#IndAS109 #Financial Instruments, #IndAS102 #Share based payments, #IndAS16 Property Plant Equipments (PPE), #IndAS103 #Business combination etc. shall be impacted using #FairValue. Time to get ready, Plan Prepare and Align with the new requirements...
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
A Presentation given by Mr. Pavan Kumar Vijay, Past President, ICSI, Chairman-Secretarial Standards Board
on Corporate Governance through the eyes of Secretarial Standards.
This presentation "FEMA Valuation Aspects(FDI & ODI) and Registered Valuation" has been delivered by Mr. Chander Sawhney at East of Kailash Study Circle of ICSI on 22/11/2014.
Project Report on Trend Analysis of Mutual FundRinshi Singh
Financial sectors, Growth Drivers of financial sector, Porter's model of financial sector, 5nance.com company details, company usp,KYC Verification process, Mutual funds performance
The Companies Act 2013 has introduced the concept of ‘Registered Valuer’ through Section 247 Chapter XVII to cover valuation of any property, stock, shares, debentures, securities, goodwill or any other assets of the company as well as its net worth and liabilities.
Valuation team of Corporate Professionals here presents the summarized presentation on Registered Valuer.
Corporate Valuations “Techniques & Application”: A compilation of research oriented valuation articles.
Contents: Business valuation, Relative valuation, Sum of the parts valuation and value creation, ESOP valuation, Discounted Cash Flow Valuation, Enterprise Valuation etc.
Valuation of Startups [with limitation of traditional valuation approach] Nitin Pahilwani
Valuation of Startups [with limitation of traditional valuation approach]
1. Introduction…
2. Factors affecting Start-up Valuation…
3. Limitation of Traditional Valuation Method…
4. Start-up Valuation Method…
a. Venture Capital Method…
b. Berkus Method…
c. Scorecard Method…
d. Risk Factor Simulation Method…
e. First Chicago Method…
5. Closing the Valuation Gap…
There are specific steps to take when preparing a supportable business valuation.
If you need a business valuation and want to make sure that the valuation expert covers all of the bases, you should look at our slides to understand the basics of the valuation process.
Business valuation fundamentals & the maximization of entity valueAzran Financial APC
In the complex world of business valuation, understanding the valuations process can be of key importance to receiving the highest and best value for your company.
Through a basic understanding of the principles of business valuation (both public and private, closely held) one can learn to navigate the process that touches everything from transactions to taxation.
Introduction to Business Valuation, Fair Market Value, reasons and elements of business valuation, methodologies of business valuation, case study on net asset value.
Contents:
Business Valuation,
Relative valuation,
Sum of the Parts (SOTP) Valuation and Value Creation,
ESOP Valuation,
Discounted Cash Flow (DCF) Valuation,
Enterprise Valuation,
Valuation Discount Applicable to Holding Companies,
Valuation in Information Technology (IT) Sector,
RBI Valuation
This presentation "FEMA Valuation Aspects(FDI & ODI) and Registered Valuation" has been delivered by Mr. Chander Sawhney at East of Kailash Study Circle of ICSI on 22/11/2014.
Project Report on Trend Analysis of Mutual FundRinshi Singh
Financial sectors, Growth Drivers of financial sector, Porter's model of financial sector, 5nance.com company details, company usp,KYC Verification process, Mutual funds performance
The Companies Act 2013 has introduced the concept of ‘Registered Valuer’ through Section 247 Chapter XVII to cover valuation of any property, stock, shares, debentures, securities, goodwill or any other assets of the company as well as its net worth and liabilities.
Valuation team of Corporate Professionals here presents the summarized presentation on Registered Valuer.
Corporate Valuations “Techniques & Application”: A compilation of research oriented valuation articles.
Contents: Business valuation, Relative valuation, Sum of the parts valuation and value creation, ESOP valuation, Discounted Cash Flow Valuation, Enterprise Valuation etc.
Valuation of Startups [with limitation of traditional valuation approach] Nitin Pahilwani
Valuation of Startups [with limitation of traditional valuation approach]
1. Introduction…
2. Factors affecting Start-up Valuation…
3. Limitation of Traditional Valuation Method…
4. Start-up Valuation Method…
a. Venture Capital Method…
b. Berkus Method…
c. Scorecard Method…
d. Risk Factor Simulation Method…
e. First Chicago Method…
5. Closing the Valuation Gap…
There are specific steps to take when preparing a supportable business valuation.
If you need a business valuation and want to make sure that the valuation expert covers all of the bases, you should look at our slides to understand the basics of the valuation process.
Business valuation fundamentals & the maximization of entity valueAzran Financial APC
In the complex world of business valuation, understanding the valuations process can be of key importance to receiving the highest and best value for your company.
Through a basic understanding of the principles of business valuation (both public and private, closely held) one can learn to navigate the process that touches everything from transactions to taxation.
Introduction to Business Valuation, Fair Market Value, reasons and elements of business valuation, methodologies of business valuation, case study on net asset value.
Contents:
Business Valuation,
Relative valuation,
Sum of the Parts (SOTP) Valuation and Value Creation,
ESOP Valuation,
Discounted Cash Flow (DCF) Valuation,
Enterprise Valuation,
Valuation Discount Applicable to Holding Companies,
Valuation in Information Technology (IT) Sector,
RBI Valuation
Presentation for ICSI Certificate Course of Valuation (Oct 2013) given by Mr. Chander Sawhney, Vice President, Corporate Professionals:
This presentation elaborately deals with Theoretical, Procedural and Regulatory aspects of Business Valuation in India.
Insight of Valuation: A presentation given at Corporate Knowledge Masterclass "Corporate Valuations- Technique and Applications" at Crowne Plaza Hotel, Gurgaon, Haryana.
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on Relative Valuation - Techniques & Application at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016.
Relative Valuation in which value of an asset or liability is done by comparing it to its Peers is pervasive and preferred for ascertaining Fair Value at a point of time as it reflects the market positioning of the Industry and Peers at that time. While Discounted Cash Flow (DCF) method is applied for arriving at Fundamental Valuation, most M&A transaction are based on Relative Valuation multiples (mostly Earnings based). The valuation ratio typically expresses the valuation as a function of a measure of Key Financial Metrics like PE, EV/EBITDA, EV/Sales or Book Value Multiple.
But before using a multiple, one should know the fundamentals determining the multiple and how changes impact it. Sanity check through use of fundamental valuation method like DCF is strongly recommended.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
The recent economic growth coupled with uncertainties has resulted in the stakeholder's curiosity and interest in Valuations of their respective investee Companies and also the estimated Valuations of the Targets available for Sale which has led to a greater demand for Business Valuation services.
Since as of now there are no Regulated standards for Valuation in India, numerous conceptual controversies still remain, even among the most prominent practitioners. With a view to give an overview of the Valuation concepts in general and the practical issues in particular, www.corporatevaluations.in, an online venture of Corporate Professionals Capital, SEBI Registered Merchant Banker has prepared this report on "Insight of Valuation". Hope you find it useful. Suggestions for improvement are invited @ info@corporatevaluations.in
Valuation in Indian Regulatory Environment with focus on Tricky Issues: the presentation given by Mr. Chander Sawhney, Vice President (chander@indiacp.com) of Corporate Professionals at the CKF Masterclass "Corporate Valuations- Techniques and Applications"...
Correlation of Value | Appraisal Review Practice Aid for ESOP Trustees | Merc...Mercer Capital
The correlated indication of value is a value that is arrived at through some reasonable, well-articulated, replicable, and credible process of selection, averaging or otherwise, of the total valuation evidence generated from the valuation methodologies employed.
In operation, developing a correlated indication of value may appear reasonably straightforward (sometimes it is), but the considerations in the process can reach back to the smallest of details and considerations in the underlying valuation methodologies.
In this whitepaper, Mercer Capital explores the topic of the correlation of value in ESOP valuations.
This article analyzes a current financial reporting and accounting issue regarding diversity in
financial reporting practice. Since the Financial Accounting Standards Board (FASB) first issued accounting
statement 157 Fair Value Measurements, entities have been required to measure investments at fair market
values. This included the requirement to categorize investments within a fair value hierarchy in preparation to
report such in the financial statements. To do this, the FASB allows companies to either categorize the
investment in the fair value hierarchy using three different input levels (Level 1, 2 and 3) or by estimating the
net asset value as a practical expedient. If the entity uses the practical expedient, the investment would be
placed within the fair value hierarchy based on whether the investment is redeemable with the investee at the
measurement date, never redeemable, or redeemable in the future. Based on this information, the investment
would be placed in either level 2 or 3 of the hierarchy. As a result, there is diversity in practice when estimating
the length of time in the near term the investment would be redeemed. This article reports the results of
evaluating how can the diversity in accounting practice related to how certain investments measured at net asset
value are categorized within the fair value hierarchy be resolved. The results of the qualitative research
conducted on the FASB proposal concluded that fourteen out of the eighteen public comment letters agreed
with FASB proposal that eliminating the requirements to classify these investments in the fair value hierarchy
would increase comparability in accounting practice among entities.
This article analyzes a current financial reporting and accounting issue regarding diversity in financial reporting practice. Since the Financial Accounting Standards Board (FASB) first issued accounting statement 157 Fair Value Measurements, entities have been required to measure investments at fair market values. This included the requirement to categorize investments within a fair value hierarchy in preparation to report such in the financial statements. To do this, the FASB allows companies to either categorize the investment in the fair value hierarchy using three different input levels (Level 1, 2 and 3) or by estimating the net asset value as a practical expedient. If the entity uses the practical expedient, the investment would be placed within the fair value hierarchy based on whether the investment is redeemable with the investee at the measurement date, never redeemable, or redeemable in the future. Based on this information, the investment would be placed in either level 2 or 3 of the hierarchy. As a result, there is diversity in practice when estimating the length of time in the near term the investment would be redeemed. This article reports the results of evaluating how can the diversity in accounting practice related to how certain investments measured at net asset value are categorized within the fair value hierarchy be resolved. The results of the qualitative research conducted on the FASB proposal concluded that fourteen out of the eighteen public comment letters agreed with FASB proposal that eliminating the requirements to classify these investments in the fair value hierarchy would increase comparability in accounting practice among entities.
Similar to Macro Issues in Valuation for M&A: Business Valuation Article (20)
The presentation discusses various aspects of Corporate Governance and involved issues, keeping in view the recent developments and controversies arose in conglomerates such as Tata and Infosys. It aims at portraying the extant position in filed of Corporate Governance vis-a-vis a pragmatic view of what it would be.
The 2015 budget had long list of expectations. On one hand; the Government has addressed major issues surrounding the foreign investors which would certainly boost capital market inflows and revive the private equity industry (by deferring GAAR by 2 years and clarifying Permanent Establishment & Indirect Transfer of Assets). On other hand; it has just rationalized the subsidies. Probably as we see growth coming in and more job creation; subsidy burden can be better dealt with by the Government. Though there are no direct benefits for the middle class. However incentives have been introduced to encourage savings. These savings are expected to fuel the infrastructure and other investment plans laid out by the Government. Certainly Foreign investors have a reason to cheer for this Pro Business; Pro Growth Government budget.
Takeover Panorama, a Monthly Newsletter by Corporate Professionals on Takeove...Corporate Professionals
-The brief synopsis of recent Judicial Pronouncements given by the SEBI, AO, SAT, Informal Guidance and Consent orders passed in the month of December in the matter of SEBI Takeover Regulations.
-The brief synopsis of latest Open Offers given by the National as well as International Acquirers under the SEBI Takeover Regulations
-Unhide the hidden but important provision of the SEBI Takeover Regulations which generally get unnoticed on a plain reading of the regulations.
Acquisition of stake in YourNest Angel Fund by Religare Global Asset Management
Acquisition of stake in Bokaro Jaypee Cement by Dalmia Bharat
Telstra Health Acquires Business of IdeaObject
Promulgation of SEBI (Share Based Employee Benefit) Regulations, 2014Corporate Professionals
With our endeavor to disseminate information upon the SEBI’s new Regulations, we have prepared a small presentation on Promulgation of SEBI (Share Based Employee Benefit) Regulations, 2014.
A Monthly Newsletter by Takeover Team of Corporate Professionals.
Highlights of this edition:-
SAT order in the matter of Mr. Hemant Kothari, Mr. Rajesh Kothari, Mr. Dharmendra Kothari, Mrs. Ichraj Devi Kothari and Mrs. Sunita Kothari
SAT order in the matter ofMr. Vilas Valunji, Mr. Partha Debnath,
Mr. Janardhan Shriniwas Purandare and Mr. V. A. Norhi
Consent Order in the matter of M/s. Count N Denier (India) Limited
Consent Order in the matter of M/s. Macor Packaging Limited
Exemption Order in the matter of M/s. Sarla Performance Limited
Adjudicating Officer/WTM Orders
Regular Section- Automatic Exemption from Open Offer
Legal Updates:
•SAT order in the matter of M/s. Coimbatore Flavors & Fragrances Limited, Mr. Benny Abraham and Mrs. S. Subashini
•SAT order in the matter of M/s. E-Ally Consulting (India) Private Limited, M/s. Shree Jaisal Electronics and Industries Limited and others
•SAT order in the matter of Mr. Vijay Jain, Mrs. Urvashi Jain, Mrs. Sunita Jain and others
•Consent Order in the matter of Mr. Santhosh J. Karimattom
•Consent Order in the matter of M/s.IFL Promoters Limited
•Consent order in the matter of M/s. Welspun India Limited
•Adjudicating Officer/WTM Orders
Regular Section: Open offer Escrow Account under SEBI (SAST) Regulations,2011
Highlights of IJTIB, August 2014
Toshiba to buy 26% stake in UEM India from existing shareholders
Nissan to build Micra for European market in France instead of Chennai
Mahindra Conveyor Systems group firm forms JV with Japanese Tsubaki
India’s Karbonn to make phone batteries with a Japanese researcher
Sun Pharmaceutical, with Daiichi, to tap the Japanese market
Japan may allow India to produce parts for US-2 amphibious aircraft
Ricoh seeks to double revenue from Indian market
Japan’s Keihin corp is set to develop facilities in Bangalore
India’s Suzlon in talks for Japanese offshore wind partner
Sony plans to set up a manufacturing plant in India
Toto opens its new plant in India
Amtek and Riken join hands to form 50:50 JV
With the promulgation of Companies Act, 2013, provisions governing issuance of shares by offering Stock Options to the Employees have been recognized under Section 62(1)(b) of the new Act, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014.
Takeover Panorama: A monthly newsletter by Takeover Code Team of Corporate Professionals
Highlights of the Panorama...
1. SAT order in the matter of Ms. Sangeeta Sethia and Mr. Prabhat Sethiavs SEBI;
2. Exemption granted in the matter of M/s Prozone Capital Shopping Centres Limited;
3. Exemption granted in the matter of M/s Sibar Autoparts Limited.
4. Adjudicating Officer/WTM Orders
Risk Management Using Derivatives in Financial Planning Journal by Gaurav K B...Corporate Professionals
it is essential to identify business risks accurately and to use the right
control techniques, because derivative products can be used as insurances policies by paying
premium. An Individual/Corporate may think that they can reduce their risk, but in case of event
specific risk and unsystematic risk it’s not the same thing. Event specific risks can only be
managed by buying insurance & unsystematic risks can be managed by diversification. In this
article we'll discuss major financial risks and the way-out to use derivatives for managing those
risks. Before going to the risk management, we have to understand some of the basic concepts
of derivatives.
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𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
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"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
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Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
This article provides a comprehensive guide on how to
effectively manage the convert Accpac to QuickBooks , with a particular focus on utilizing online accounting services to streamline the process.
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
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Macro Issues in Valuation for M&A: Business Valuation Article
1. Macro Issues in Valuation
for M&A
By: Chander Sawhney
(FCA, CS, Certified Valuer (ICAI)
Asst. Vice President
SEBI REGISTERED (CAT -I) MERCHANT BANKER
Ggdd
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
2. AGENDA
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
- Valuation;
- Mergers & Acquisition;
- Macro Issues in Valuation for Mergers & Acquisition;
- M&A Case Study
4. Valuation
Valuation is the process of determining the “Economic Worth” of an Asset or Company
under certain assumptions and limiting conditions and subject to the data available on the
valuation date.
Source -International Valuation Standard Council
Depends upon :
• Mergers
• IPO
• RBI
• Income Tax
• ESOP
• Companies Act
• SEBI
• Stock Exchange
Purpose Regulatory Accounting
• Purchase Price
Allocation
Dispute Resolution
• Company Law Board/
Courts
• Impairment /
Diminution
• Arbitration
• Mediation
• Acquisitions /
Investment
• Voluntary
Assessment
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
5. Key Facts of Valuation
The Value of a business, by whatever valuation method it is obtained, is not the selling price of the
business. Value is an economic concept based on certain data & assumptions, however Price is
what a Buyer is willing to pay keeping in consideration the Economic and Non Economic factors like
Emotions, Perception, Greed Etc which cannot be valued as such.
The Value is a subjective term and can have different connotations meaning different things to
different people and the result may not be the same, as the context or time changes.
Valuation is more of an art and not an exact science. The Art is Professional Judgment and Science
is Statistics. Mathematical certainty is neither determined nor indeed is it possible as use of
professional judgment is an essential component of estimating value
Though the value of a business can be objectively determined employing valuation approaches, this
value is still subjective, dependent on buyer and seller expectations and subsequent negotiations
and the Transaction happens at negotiated price only.
PRICE IS NOT THE SAME AS VALUE
TRANSACTION CONCLUDES AT NEGOTIATED PRICES
VALUATION IS HYBRID OF ART & SCIENCE
VALUE VARIES WITH PERSON, PURPOSE AND TIME
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
6. CASH FLOW
INVESTOR ASSIGN VALUE BASED ON THE CASH FLOW THEY EXPECT TO
RECEIVE IN THE FUTURE
- Dividends / distributions;
- Sale of liquidation proceeds;
VALUE OF A CASH FLOW STREAM IS A FUNCTION OF
-Timing of cash Receipt;
- Risk associated with the cash flow;
ASSETS
OPERATING ASSETS
- Assets used in the operation of the business including working capital, Property, Plant &
Equipment & Intangible assets;
- Valuing of operating assets is generally reflected in the cash flow generated by the business;
NON - OPERATING ASSETS
- Assets not used in the operations including excess cash balances, and assets held for
investment purposes, such as vacant land & Securities;
- Investors generally do not give much value to such assets and Structure modification may be
necessary
Key drivers of valuation
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
7. Broad Approaches to Valuation
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
Applicability of a particular
approach depends upon
On whose behalf? – one
buyer vs another buyer, buyer
vs seller;
For what purpose? –
independent strategic
acquisition, group company
consolidation, cross border
transaction
When? – distress situation,
industry downturn, boom etc
9. M&A is primarily driven with motive of achieving Inorganic growth and Synergy i.e. the
potential additional value gain from combining two firms, either from operational or
financial sources.
However, certain studies have shown that most – but not all – M&A fail to deliver value
and bridge the price-value gap
One of the reasons is that the aggressive promoters in consultation with eager advisors
may result in pushing up the acquisition price; Resultantly, the value often get
transferred from acquirer’s shareholders to target company’s shareholders;
M & A
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
10. M&A
Mergers Acquisitions
Stock
Purchase
COURT PROCESS NON - COURT PROCESS
Types of M & A
SEBI
[TAKEOVER CODE]
Note: Asset Purchase under Acquisition is Ignored
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
391-394 of
Companies Act
11. Valuation for Merger
APPLICABLE LAW FOR VALUATION FOR MERGER:
1.Companies Act, 1956 [Section 391- 394];
2.Fairness Opinion [Clause 24 (h) of the Listing Agreement];
3.SEBI Notification [CIR/CFD/DIL/5/2013], dated 4th
February, 2013
KEY HIGHLIGHTS OF SEBI NOTIFICATION
1. Approval of the Scheme by SEBI on recommendation of Stock Exchange;
2. Recommendation of Audit Committee of the Listed Co. on the valuation done by
Independent Chartered Accountant;
3. Uploading of the Valuation Report on the Website of Co. and Stock Exchange;
4. Filing of Complaint Reports;
5. Meeting of Shareholders through Postal Ballot and e-Voting;
None of the aforesaid laws provide for specific valuation approaches under Mergers;
“Valuation is generally the Starting Point of the M&A process”
12. Valuation for Merger.. Contd..
4. Judicial Pronouncements;
WHETHER VALUATION IS REQUIRED FOR MERGER?
In the matter of Shreya’s India (P) Ltd. v. Samrat Industries (P) Ltd. the Regional Director (RD)
raised an objection that no valuation report has been filed and that the exchange ratio for
amalgamation has not been worked out by an independent valuer.
“The Hon’ble High Court of Rajasthan overruled this objection and sanctioned the scheme of
amalgamation by holding that there was no legal or factual impediment to grant sanction to the
scheme of amalgamation.”
WHETHER ANY VALUATION METHODOLDY IS REQUIRED FOR MERGER?
Though there are no specific methodology prescribed for valuation under Merger, however
In Hindustan Lever Employees Union v. Hindustan Lever Ltd and Others, Bombay High
Court -
“accepted the ratio of 2:2:1 as Income, Market and Asset Approach on which the valuation
was based.”
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
13. Valuation for Acquisition
APPLICABLE LAW:
SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011
FREQUENTLY TRADED
SHARES
INFREQUENTLY
TRADED SHARES
Traded Turnover of Shares ≥ 10%
[In the Last Twelve Calendar Months preceding
the Month of Public Announcement (P.A.)]
Traded Turnover of Shares < 10%
[In the Last Twelve Calendar Months preceding
the Month of Public Announcement]
Method of Valuation
1.Highest Negotiated Price Per Share under agreement
attracting the obligation to make P.A.
2.The volume weighted avg. price paid or payable by
acquirer or PAC during the 52 Weeks;
3.The Highest Price paid or payable by acquirer or PAC in
last 26 Weeks;
4.Volume weighted average Market Price of Shares for a
period of 60 trading days
HIGHEST PRICE AMONG ALL IS THE VALUE PER SHARE
FOR P.A.
Method of Valuation
1.Book value,
2.Comparable Trading Multiples;
Such other Parameters as are customary for
valuation of shares of such companies
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
14. Macro Issues of Valuation in
MERGERS & ACQUISITION
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
15. Fair Value in M&A ?
Fair Value is “The price at which an entity would change hands between a willing buyer and
willing seller, neither being under compulsion to buy or sell and both having reasonable
knowledge of all relevant facts.”
M&A VALUATIONS MAY HOWEVER DEPART FROM THEIR FAIR VALUES ON ACCOUNT OF:
oValuing Acquisition Targets on Standalone basis and Valuing them with Synergy
oDistress Sale Vs. Desperate Buy
oEmpirical Evidence
o Control Premiums and Minority & Marketability Discounts
oComparable Transaction Multiples (CTM) and Price of Recent Investments (PORI)
oCompetitive Positioning and Risk in Corporate Acquisitions
oValuation of Intangible Assets and Purchase Price Allocation (PPA)
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
16. Swap Ratio Valuation
• In case of a merger valuation, the emphasis is on arriving at the relative values of the
shares of the merging companies to facilitate determination of the swap ratio
– Hence, the purpose is not to arrive at absolute values of the shares of the companies
• The key issue to be addressed is that of fairness to all shareholders
– This is particularly important where the shareholding pattern and shareholders vary
between the two companies
• There are established legal precedence for merger valuation methodologies
– Valuer’s role is to incorporate case specific factors and use appropriate methodologies so
as to determine a fair ratio
– Usually, best to give weight ages to valuation by all methods
– Market price method and Earnings methods dominate.
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
17. • If the exchange ratio is set too high, there will be a transfer of wealth from the
bidding firm’s stockholders to the target firm’s stockholders.
• If the exchange ratio is set too low, there will be transfer of wealth from the
target firm to the bidding firm’s stockholders.
17
Impact of Swap Ratio Valuation
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
18. “Beauty lies in the eyes of the beholder; valuation in those of the
buyer”
• An investor seeking to acquire control of a company is typically
willing to pay more than the current market price of the company.
Control premium is an amount that a buyer is usually willing to
pay over the fair market value of a publicly traded company to
acquire controlling stake in a company.
• Control can be direct (shareholding or Authority to appoint Board)
or indirect (veto power, casting vote etc)
• Research has shown that the control premium in India has ranged
from 20% to 37% in the past few years having median of 30%.
Control Premium and Takeover Bid
Financial
Year
No. of
Transactio
ns
Median
Premium
2006 25 37%
2007 29 20%
2008 38 26%
2009 44 29%
2010 22 31%
2011 42 32%
Total 228 30%
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
19. CASE STUDY
Calculation of Exchange
Ratio in M&A and
Independent Buyer-
Seller perspective
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
20. Features of Steel Company*
o Frequently Traded Listed Company
o Low Profit Margin, due to high Power Cost
o Running in Low Capacity Utilization due to poor supply of Power
Features of Power Company*
o Unlisted Company
o Company is implementing the Power Plant of 9.5 MW , The Production is expected to start with in
Year
Acquisition Rationale
o Location Advantage, both companies have their unit in same Location
o Synergistic benefits- (Captive Power Plant will reduce the Operating cost, because Steel Industry
is energy consuming)
o Tax benefit from the unabsorbed losses of Power Company
o Up the value chain
o Capacity utilization will increase in existing steel business, due easy availability of Power
*Common Promoter Group
Merger of a Unlisted Power Company into Listed Steel
Manufacturing Company
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
21. EXCHANGE RATIO & VALUATION –MERGER
• Valuation on Steel Company
• Valuation on Power Company
Valuation Method Rs Crores Weights Value of Company Weighted Value
Market Cap 2 100 200
Income Method 2 95 190
NAV 1 150 150
Fair Value of Company 108
Valuation Method Rs Crores Weights Value of Company Weighted Value
Market Cap 2 NA NA
Income Method^ 2 90 180
NAV 1 50 50
Fair Value of Company 76.67
^ considering 3 years forward earnings and 80-90% Capacity utilization basis
Merger of a Unlisted Power Company into Listed Steel
Manufacturing Company
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013
22. Pre Merger Shareholding of Steel Company
Category No of shares % Holding
Promoter 5,000,000 50%
Public 5,000,000 50%
Total 10,000,000 100%
Pre Merger Shareholding of Power Company
Category No of shares % Holding
Promoter 5,000,000 100%
Public - -
Total 5,000,000 100%
Post Merger Shareholding of Steel Company
Category No of shares % Holding
Promoter 12,099,074 71%
Public 5,000,000 29%
Total 17,099,074 100%
Independent Buyer-Seller Perspective
Valuation of Power business on as is
basis – Rs.55 crores
Assets Method
Earnings Method (Includes
premium for the license)
Valuation of Power business
taking into account synergies –
Rs. 70 crores
An independent Buyer would bid
an amount in excess of valuation
on standalone basis (Rs. 55
crores) and below Synergy
valuation (Rs.70 crores).
Acquisition Price would finally
depend on negotiations.
Pre and Post Shareholding
ASSOCHAM National Conference on "Value Creation through Mergers & Acquisitions ” – 30th
April,2013