Business valuation

Business valuation literature provides various other methods for estimating terminal values (for an overview see Koller et al. 2005, pp. 271-290). Unfortunately, as cash flows cannot be allocated to individual decisions in a network design model, a cash flow-based estimate is not possible. Instead, book value or liquidation value at the end of the planning horizon could be used. For example, Fong and Srinivasan (1981, p. 790) include a terminal value function in the unit capacity acquisition cost function. However, they do not specify how this function can be quantified in real-world applications. The major disadvantages are that it is difficult to justify the assumptions underling the terminal value estimate and that restructuring expenditures cannot be properly evaluated. 

American Society of Appraisers (ASA) http //www.appraisers.org/ASAHome.aspx (accessed July 12,2010). ASA is a multidisciplinary organization of accredited appraisal professionals recognized by the U.S. Congress as a source of appraisers and appraisal standards. The Web site provides a directory to valuation expertise for mine and quarry machinery and specialty equipment, oil and gas machinery and equipment, business valuation, and real and personal property. 

Luehrman, TA. What s it worth A general manager s guide to valuation. Harvard Business Rev May-June 1997 132-42. 

JV would compete with core businesses of the partners Valne of tangible and intangible assets brought to the JV are difficult to valuate fairly... 

I want to emphasize the purely descriptive nature of the adjective altered. It means simply "basically different" or "importantly different," without implying that the d-ASC is better or worse than any other d-SoC. The first business of science is accurate description, valuation cannot be avoided, but must not be confused with description. This is discussed at greater length in Chapter 17. Cback)... 

One of the most contentious issues in business development is valuation. In truth there is no method which will provide a correct value. Value can only be accurately gauged when an asset is realized. Between the invention of an idea for a product or company and the eventual sale, no matter what method is chosen to act as a surrogate for the real value, intangible elements will remain and confound the accuracy of any valuation. Even when an asset is sold the price paid may not match its expected value. 

The first step is to conduct a valuation of the current business plan, using multiple scenarios if possible. A continuous, internal company valuation is relatively easy to implement, and creates crucial transparency of the value creation potential of the current business plan and its drivers. 

A business s equity value can be split into valuation multiple, revenues, margin, and net debt. Any changes in equity value must therefore be linked to a change in at least one of these four components. 

It might seem counterintuitive, but the returns achieved by buyout firms depend crucially on public markets (e.g., Wright, M. Robbie, K. Gompers, P. Lerner, J. Clow, R. Smith, P.). Weak capital markets and the decline in valuations have made it extremely difficult to use IPOs as an exit channel. Structural impediments have also arisen. For example, an organization needs to be much larger now before it attracts analyst attention. This means that only businesses with financial critical mass are likely to have any chance of floating in Europe. The situation is different in North America where the market for mid-caps has remained popular, keeping the threshold for public businesses considerably lower. 

Hardymon, Felda, Lerner, Joshua, Leamon, Ann. 2003. Between a Rock and a Hard Place Valuation and Distribution in Private Equity. Harvard Business School note, no. 9-803-161 pp. 1-28. Boston, MA. 

Based on the preceding discussion, it should be obvious that determining the value of a business is not an exact science. While a number of established techniques may be used, each business is unique. In fact, the value of a business ultimately is determined through negotiation between the buyer and the seller (Jackson, 2002). The agreed-on price usually will lie somewhere between the initial price of the seller and the initial offer of the buyer. The valuation of a business is based on the assessment of facts about the business, informed judgment, and some common sense (Jackson, 2002). 

The strategy phase focused on integrating the patent portfolio with business objectives in order to maximise its value. It also identified gaps in the portfolio that needed to be addressed. This phase is connected to the valuation and competitive assessment phases. 

Finally, the significant valuation differences between companies are likely to make some of them attractive acquisition candidates for the more successful and financially strong players in the industry. Some companies may even, on occasion, appear quite cheap. Also, private equity firms have entered the industry in force and are hkely to increase their presence, providing an enabler and catalyst for portfolio restructuring. They have access to plenty of cash (often more than the industry players themselves) and are run by very strong teams, with excellent skills in managing and improving multi-business portfohos (see Chapter 8). 

We believe that the visible successes of Cain, Huntsman, and a few other industry insiders (e.g., George Harris, Hal Sorgenti) have in recent years attracted a lot of imitators, especially financial buyers, into the chemicals sector (Fig. 8.1). Industry observers point out that given the low public valuations of chemical assets and the unprecedented levels of uninvested funds available today (shown in Fig. 8.2), chemical businesses make ideal LBO targets. Their logic is that the basic industrial sectors, such as chemicals, have reasonably predictable cash flows, unlike the... 

A critical aspect of integrating sustainability into business is in the area of valuation. How do we know the financial impacts of our decisions How can performing more sustainability help to reduce costs, avoid future costs, increase the company s value proposition, support growth, and so on What are the links between intangibles related to social and environmental performance and a hrm s overall performance What contributes to value creation in the chemical industry How can we reconcile the fact that we may incur costs for performing more sustainably in the short term while the benefits may not be captured until the long term similarly, how do we justify costs associated with our business decisions when the benefits might accrue to others in the value chain We know the value of ecosystem services is both invaluable - that is, our life depends on them - and of no real market value how then should we value ecosystem services in order to protect them for our survival and that of our business institutions This section attempts to offer points of view on these topics. 

ACHIEVING BUSINESS VALUE THE INVESTMENT COMMUNITY PERSPECTIVE ON THE IMPORTANCE OF INCLUDING ENVIRONMENTAL AND SOCIAL ASPECTS IN VALUATIONS... 

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