Preface | p. xi |
Dedication and Acknowledgmentsxv | |
Winning through Merger and Acquisition | p. 1 |
Critical Values Shareholders Overlook | p. 2 |
Stand-alone Fair Market Value | p. 4 |
Investment Value to Strategic Buyers | p. 5 |
"Win-Win": Benefits of Merger and Acquisition | p. 7 |
Building Value and Measuring Return on Investment in a Private Company | p. 13 |
Public Company Value Creation Model | p. 13 |
Computing Private Company Value Creation and ROI | p. 15 |
Analyzing Value Creation Strategies | p. 30 |
Competitive Analysis | p. 37 |
Linking Strategic Planning to Building Value | p. 39 |
Assessing Specific-Company Risk | p. 40 |
Competitive Factors Frequently Encountered in Nonpublic Entities | p. 45 |
Financial Analysis | p. 46 |
Conclusion | p. 51 |
Merger and Acquisition Market and Planning Process | p. 53 |
Common Seller and Buyer Motivations | p. 55 |
Why Mergers and Acquisitions Fail | p. 57 |
Sales Strategy and Process | p. 58 |
Acquisition Strategy and Process | p. 66 |
Due Diligence Preparation | p. 77 |
Measuring Synergies | p. 81 |
Synergy Measurement Process | p. 82 |
Key Variables in Assessing Synergies | p. 85 |
Synergy and Advance Planning | p. 86 |
Exit Planning | p. 89 |
Why Is Exit Planning So Difficult? | p. 90 |
What Makes Planning for Your Private Company Investment Unique? | p. 93 |
Why Should Exit Planning for Your Private Company Begin Now? | p. 95 |
Exit Planning Process | p. 96 |
Setting Exit Goals | p. 98 |
Owner Readiness | p. 99 |
Type of Exiting Owner | p. 100 |
Exit Options | p. 101 |
Range of Values | p. 105 |
Execution of Exit Plan | p. 107 |
Valuation Approaches and Fundamentals | p. 109 |
Business Valuation Approaches | p. 109 |
Using the Invested Capital Model to Define the Investment Being Appraised | p. 111 |
Why Net Cash Flow Measures Value Most Accurately | p. 112 |
Frequent Need to Negotiate from Earnings Measures | p. 114 |
Financial Statement Adjustments | p. 117 |
Managing Investment Risk in Merger and Acquisition | p. 120 |
Conclusion | p. 125 |
Income Approach: Using Rates and Returns to Establish Value | p. 127 |
Why Values for Merger and Acquisition Should Be Driven by the Income Approach | p. 127 |
Two Methods within the Income Approach | p. 129 |
Three-Stage DCF Model | p. 134 |
Establishing Defendable Long-term Growth Rates and Terminal Values | p. 135 |
Cost of Capital Essentials for Accurate Valuations | p. 141 |
Cost of Debt Capital | p. 142 |
Cost of Preferred Stock | p. 143 |
Cost of Common Stock | p. 144 |
Fundamentals and Limitations of the Capital Asset Pricing Model | p. 145 |
Modified Capital Asset Pricing Model | p. 148 |
Build-up Model | p. 149 |
Summary of Ibbotson Rate of Return Data | p. 155 |
Private Cost of Capital | p. 156 |
International Cost of Capital | p. 158 |
How to Develop an Equity Cost for a Target Company | p. 158 |
Weighted Average Cost of Capital | p. 163 |
Iterative Weighted Average Cost of Capital Process | p. 164 |
Shortcut Weighted Average Cost of Capital Formula | p. 168 |
Common Errors in Computing Cost of Capital | p. 170 |
Market Approach: Using Guideline Companies and Strategic Transactions | p. 173 |
Merger and Acquisition Transactional Data Method | p. 174 |
Guideline Public Company Method | p. 178 |
Selection of Valuation Multiples | p. 181 |
Market Multiples Commonly Used | p. 183 |
Asset Approach | p. 189 |
Book Value versus Market Value | p. 190 |
Premises of Value | p. 191 |
Use of the Asset Approach to Value Lack-of-Control Interests | p. 191 |
Adjusted Book Value Method | p. 192 |
Treatment of Nonoperating Assets or Asset Surpluses or Shortages | p. 197 |
Specific Steps in Computing Adjusted Book Value | p. 197 |
Adjusting Value through Premiums and Discounts | p. 199 |
Applicability of Premiums and Discounts | p. 200 |
Application and Derivation of Premiums and Discounts | p. 201 |
Apply Discretion in the Size of the Adjustment | p. 203 |
Control versus Lack of Control in Income-driven Methods | p. 204 |
Fair Market Value versus Investment Value | p. 205 |
Reconciling Initial Value Estimates and Determining Value Conclusion | p. 207 |
Essential Need for Broad Perspective | p. 207 |
Income Approach Review | p. 210 |
Market Approach Review | p. 215 |
Asset Approach Review | p. 216 |
Value Reconciliation and Conclusion | p. 218 |
Checks to Value | p. 220 |
Candidly Assess Valuation Capabilities | p. 221 |
Art of the Deal | p. 223 |
Unique Negotiation Challenges | p. 223 |
Deal Structure: Stock versus Assets | p. 225 |
Terms of Sale: Cash versus Stock | p. 231 |
Bridging the Gap | p. 233 |
See the Deal from the Other Side | p. 236 |
M&A and Financial Reporting | p. 239 |
U.S. GAAP and IFRS | p. 240 |
Relevant FASB and IFRS Statements | p. 241 |
Reviews by the Audit Firm | p. 242 |
ASC 820: Fair Value Measurements (SFAS 157) | p. 243 |
ASC 805: Business Combinations (SFAS 141(R)) | p. 246 |
ASC 350: Goodwill and Other Intangible Assets (SFAS 142) | p. 255 |
Incorporating ASC 805 (SFAS 141(R)) into the Due Diligence Process | p. 257 |
References | p. 260 |
Intangible Asset Valuation | p. 263 |
Approaches to Valuing Intangible Assets | p. 264 |
Key Components to Intangible Asset Valuation | p. 266 |
Intangible Asset Valuation Methods | p. 275 |
Conclusion | p. 284 |
Measuring and Managing Value in High-Tech Start-ups | p. 285 |
Why Appraisals of High-Tech Start-ups Are Essential | p. 285 |
Key Differences in High-Tech Start-ups | p. 287 |
Value Management Begins with Competitive Analysis | p. 288 |
Stages of Development | p. 290 |
Risk and Discount Rates | p. 292 |
Start-ups and Traditional Valuation Methods | p. 293 |
QED Survey of Valuation Methods Used by Venture Capitalists | p. 298 |
A Probability-Weighted Scenario Method to Value Start-ups | p. 303 |
Equity Allocation Methods | p. 309 |
Conclusion | p. 311 |
Cross-Border M&A | p. 313 |
Strategic Buy-Side Considerations | p. 313 |
Due Diligence | p. 322 |
Sell-Side Considerations | p. 326 |
Merger and Acquisition Valuation Case Study | p. 329 |
History and Competitive Conditions | p. 330 |
Potential Buyers | p. 331 |
General Economic Conditions | p. 332 |
Specific Industry Conditions | p. 333 |
Growth | p. 334 |
Computation of the Stand-alone Fair Market Value | p. 334 |
Computation of Investment Value | p. 348 |
Suggested Considerations to Case Conclusion | p. 356 |
About the Authors | p. 350 |
Index | p. 361 |
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