Documentnumber 1 Content ExecutiveSummaryIntroductiontovaluationDiscountcashflow DCF B1 CashflowB2 DiscountrateandWACCB3 TerminalvalueB4 CommonDCFQ AComparableC1 ComparablemethodologyC2 ListedpeercomparableC3 TransactioncomparableRealOptionOthervaluationtopicsF1 InvestmentprocessandmanagementF2 DatagatheringF3 DefinearelevantvaluationrangeF4 SensitivityanalysisF5 IndustryspecificvaluationinsightAppendix Documentnumber 2 Executivesummary Documentnumber 3 Introductiontovaluation Documentnumber 4 Valuationtoolswilltypicallyrevolvearoundtwotypesofmethodologies FutureCashFlowsandHistoricalMarketPrices Financialstatementsandanalysts research Macroeconomicandstockmarketdata CompanyValue DCFmethod DiscountedDividendmethod Comparablecompaniesmethod Asset basedmethods Differentvaluationmethods ManagementJudgment Realoptionmethod Comparabletransactionsmethod Documentnumber 5 Makingagoodvaluationrequiresagoodunderstandingofthetarget Thereisnoblack boxtomakeavaluation Valuationisinformation ClassicmethodologyaremostlyusedAdvancedcomputersystemsareemerging Inputdatamustbecarefullydocumented traceability ValuationstartswithaonepageSWOTanalysisofthetarget Valuationisamatterofcommonsense FormulasshallnotreplaceyourbestjudgmentKeepaskingkeyquestionsabouttargetBeasrigorousaspossibleateverystepoftheprocess Source RolandBerger Documentnumber 6 Gettingstartedwithvaluation Whatisthepurposeofvaluatingassets Whatdoesavaluemean Whatarethemosttypicalproblemsassociatedwithavalue Transaction Buyside sellside Representation Balancesheet portfolio Riskassessment Loans Agoodstart Valueisnotaprice Forwho Forhowlong Basedonwhichassumptions Source RolandBerger 1 2 3 Documentnumber 7 Makingagoodvaluationrequiresagoodunderstandingofthetarget Thereisnoblack boxtomakeavaluation Valuationisinformation ClassicmethodologyaremostlyusedAdvancedcomputersystemsareemerging Inputdatamustbecarefullydocumented traceability ValuationstartswithaonepageSWOTanalysisofthetarget Valuationisamatterofcommonsense FormulasshallnotreplaceyourbestjudgmentKeepaskingkeyquestionsabouttargetBeasrigorousaspossibleateverystepoftheprocess Source RolandBerger Documentnumber 8 Preliminaryadviceforagoodvaluationwork Knowyourtarget rememberthatultimatelythemanagementwillmakethedifference Avoidworkingundersituationofstress takesometimetoreflectonthenumbers Askforhelpandideasifyoumeetunexpectedproblems usethepoweroftheteam Shareyourvaluationconclusionswithapeer Haveyourvaluationworkcheckedbyavaluationcommitteebeforecomingbacktotheclient 1 2 3 4 5 Source RolandBerger Documentnumber 9 Givingtherightnumber Acompanyvalueisalwaysarange Theresultofavaluationshouldbeveryclearononepage Rememberthatvaluationismosthelpfulfornegotiatingpurposes DerivedfromdifferentmethodologiesNottoowidetobecredible MakeveryclearvaluationreportorresumethevaluationprocessIdentifyonaseparatedmemothepotentialissue Minorityinvestment writingonecheck Majorityinvestment writingmultiplechecks Source RolandBerger Documentnumber 10 Workinginanuncertainenvironmentwithconfidence ChoosingagrowthrateforrevenuesisdifficultExpendituresarenotalwayswelldetailedSomeexpenditurescanbealsoconsideredasassetsSensitivitytothevariationof commodities interestrate taxes WorkonindustryforecasttofindanaverageratebybusinessesTrytoreadmorecarefullyfinancialreportsandthoseofcompetitorsTrytobeconservative andpreferincreasingthegrowthpotentialRunasensitivityanalysisaftermodelinga basecase Selectedvaluationlimitations Solutions Source RolandBerger Documentnumber 11 Buildaknowledgebase Source RolandBerger Financialinformationisvaluable Keepalibraryofvaluationcases Sharethisinformationinsidetheteam BuildatransactiondatabaseMaintainitproperlyandfeedit ModelbusinesscaseDifficultiesandkeyissues EnrichthelearningexperienceofeachteammemberMakeeachteammemberacontributor Documentnumber 12 Calculatingafairvalueisalwaysachallenge Modelsarenotalways stable TerminalvalueandvolatilityhaveahugeimpactonfinalresultsTheflowofcorporatenewsdoesnotstop Difficultsituation Idealsituation 500 1000 1500 Comparables DCF RealOptions 500 1000 1500 DCF RealOptions Comparables Source RolandBerger Documentnumber 13 Thevaluationequilibriumwillalsobeaffectedbydynamicexogenousfactors Changesinmacroeconomicconditionswillinfluencethevaluation inparticularInterestratesGDPgrowthrateTaxrateandgovernmentpolicySpecifictechnicalmarketfactorsLiquidityTransactioncostCorporateIssuesShareholderspactAgencysignalsandmanagemententrenchmentissues Documentnumber 14 Ultimately valuationsensitivitywilldependonthemanagementcapacitytoleadvaluecreationinitiatives TheshareholdervalueofaninvestmentisthedifferencebetweenanacquisitionpremiumpaidinadvanceandthemanagementcreationinitiativestakenafterthedealBeforemakinganinvestment itisvitaltoassesstherisksandopportunitiesinvolvedindepthand ifyoudecidetogoahead encouragethemanagementofthetargettomovequicklyandeffectively Investmentvalue Valueofintendedtarget Priceofintendedtarget Stand alonevalue Potentialvaluecreationinitiatives Marketpricepriortoinvest