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Performance of Valuation Methods in Financial Transactions

Heller, David (Editor)


1. Edition June 2021
208 Pages, Hardcover
Wiley & Sons Ltd

ISBN: 978-1-78630-636-4
John Wiley & Sons

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Financial operations depend on potential value creation, thenature of the shareholder base, the level of development of thecompany and its growth prospects. They result from differentcommercial and financial strategies that must integrate theinterest of the capital holders, the influence and strategy of thegroup in the initiative and the structure of the offer.

This book examines how, in practice, a company s capital isstructured, taking into account the interests of variousstakeholders. The performance of valuation methods, whichserve investors in their decision-making and financialarrangements, is developed in detail. Depending on the contextspresent in the control market, the methods of stock market andtransactional comparables, discounted cash flows and thepatrimonial approach, will be favored to assess the value of acompany s shares.Performance of Valuation Methods in Financial Transactions is anin-depth analysis of equity transactions and is aimed at studentsand corporate finance professionals.

Introduction vii

Chapter 1. Traditional Valuation Methods and Ways of Applying Them 1

1.1. Introduction 1

1.2. The cost of financial structure 3

1.2.1. Financial asset valuation 4

1.2.2. Optimal capital structure 10

1.2.3. Theories of organizations 19

1.3. Valuation measures and follow-up measures 23

1.3.1. Evaluation by comparative approach 24

1.3.2. Flow assessment 34

1.3.3. Valuation through propriety and mixed approaches 44

1.4. The perspectives of assessment: control operations 50

1.4.1. The shareholder 51

1.4.2. Control negotiations 59

1.4.3. Leveraged buyout operations 76

1.5. Conclusion 87

Chapter 2. The Performance of the Assessment and the Creation of Value from Control Operations 89

2.1. Introduction 89

2.2. Theoretical adjustments 90

2.2.1. Reconciliation of the traditional view with the Modigliani-Miller theorem 91

2.2.2. Optimizing the valuation methods 109

2.3. Contextual impacts and adjustments 131

2.3.1. Leverage transactions 132

2.3.2. Stock market multiples: from the impact of structures to anticipating profitability 136

2.3.3. Two delicate contexts for valuation: the bankruptcy situation and the start-up company 149

2.4. The creation of value resulting from control operations 158

2.4.1. The creation of value from the buyout of companies in bankruptcy 158

2.4.2. Abnormal returns resulting from control operations 159

2.4.3. The motivation of buyers to initiate control operations 161

2.5. Conclusion 163

Conclusion 165

Appendix. Demonstrating the Terminal Value (TV) of DCFs 169

References 171

Index 179
David Heller is a lecturer in finance and leads the masters infinance at the ISC in Paris, France.