institut for regnskab, tom hansen corporate valuation 2002-2 workshop teams, groups, buyer/seller...

Corporate Valuation 2002-2

Institut for Regnskab, Tom Hansen

Workshop

•Teams, groups, buyer/seller and companies

•Work plan - presentations from groups

•Exercises



Teams, groups and companies

Team E-mail from # Groups, # Persons, Comments Buyer/Seller

Marriott Ryan Pirnat 3 groups, 3 (4?) S, 4 B, 4 B Company?B&O Silvia Pagh Sølvsteen 3 groups, 3, 3, 2 Buyer / sellerB&O Rasmus Opstrup 2 groups, 3, 4 Buyer/SellerMicon Agnieszka Konkel 3 groups, 4 B, 4 B, 3 S -Vestas Jurgen Jansen 1 group, 4 B Other groupsVestas Jakob Bendixen 1 group, 3 B Other groupsColor Print ? Jakob Loenbro Jensen 1 group, 4 Other groups,

Buyer/seller? Kristian Marthedal 3 groups, 4, 3, 4 Company,

Buyer/seller? Geir Midtmoen 1 group, 2 Company, other

groups, Buyer / seller



Work plan (I)

Tasks, dates & responsibilities

Information gathering & learning• Annual reports, other relevant materials from the

company (homepage)• Roadshow - information from company• Contacting / Meeting the company (investor

relations / CFO)• Important competitors (annual reports)• Trade / Industry association• Stock exchange• Share analysts• Market information (library)• Search on www• Read and understand the information you have

gathered



Work plan (II)

Chapter 4, 5, 6 & 7 on 30 SeptemberChapter 8-13 on 7 October

• Business Strategy analysis (chapter 11)• Accounts analysis (chapter 9)• Financial analysis (chapter 10)• Prospective analysis (chapter 11, 12 & 13)

· Building model - accounts, prospects (CD)

•Mid stage report - Oct 21, evening•Draft report & price - Nov 13, evening•Negotiation - Nov 16th•Final report - Nov 25



Exercise 2.7 (1)

Current valuation: EG performance from shareholder view

•Woodco acquisitions accompanied by stock price downturns.•Consumerco growing at rate of inflation only•Consumerco cash flow subsidized Woodco and Foodco projects•Foodco’s high capital requirements reduced earnings growth•Analysts consistently revised EG forecasts downward



Exercise 2.7 (2)

As is value: Discounted cash flow analysis

• Historical value is below EG market value• Foodco value is less than the invested capital

(focus is on growth)• Consumerco cash flow comprises most of EG’s

value (focus is on cash flow)• Woodco consolidation adds significant

component of value• Headquarters' costs are a large drag on value



Exercise 2.7 (3)

Internal improvements: key value drivers. Benchmarking with comparable firms and business system analysis

Consumerco: holding prices down, no investments in R&D, sensitive to sales, sales force lack productivity, relatively high costs of goods sold.Woodco needs to focus on higher margins and less on growth, stick to the basic, mass-market segment of the businessFoodco has no advantages in its extremely competitive markets, cut back to only profitable locations, franchise to decrease cost of capital.Eliminate 50% of overhead.



Exercise 2.7 (4)

External improvements: Sale to strategic buyer, flotation, MBO, liquidation

• Breakup based on comparable PE’s and market-to-book would not outperform current market value.

• Consumerco is natural acquisition target with high cash flows.

• Foodco real estate holdings make it a partial liquidation candidate.

• Sell consumer finance portfolio since operating costs exceeds net interest income.

• Because of consolidation, Woodco would not attract a buyer for the risk of reconstructing Woodco’s many components.

• EG is a takeover target with Consumerco’s cash flow



Exercise 2.7 (5)

New growth opportunities: Long-term growth alternatives.

•Acquisition and other growth initiatives is on the agenda.

•New business in Consumerco, exploiting brand name.•Build on the restructuring initiatives already identified.

Potential value of financial engineering: debt management alternatives.

•Use stable cash flows to support more debt.•Raise debt to repurchase shares or pay special dividends.



Exercise 2.9 & 2.10

•focus performance on value creation•develop value-based performance targets•restructure incentives•evaluate strategic decisions in terms of impact on value.•communicate value to investors •reshape the role of CFO

•B



Next

Next workshop and lecture will be in 14 days (30 September)

Workshop (8.55-9.40)

• Dialog and coaching

• Exercises 4.3, 4.11, 7.10

Lecture: Strategy & Metrics

• CKM: 4, 5, 6, 7 + Articles (2*Ghemawat)

institut for regnskab, tom hansen corporate valuation 2002-2 workshop teams, groups, buyer/seller...

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