Course background

The valuation of companies is fundamental to the operation of the capital markets. It forms the basis of share trading and corporate finance activity, including capital raising, mergers, acquisitions, demergers and disposals. The ability of market participants to identify under or overvalued companies drives portfolio outperformance and the creation of shareholder value.

The purpose of the course is to analyze and practice a range of valuation techniques, including their appropriate application, their advantages and disadvantages. The course considers a wide range of quantitative and qualitative factors that determine valuations. A number of case studies across a range of industries is used to help course participants practice valuation techniques and also to illustrate that corporate valuation can involve a high degree of subjectivity. This course does not extend to the analysis of banks, insurance companies or structured vehicles.

Methodology

The course combines formal theoretical instruction with frequent reference to market data, use of exercises and case studies. Case studies are based on real situations and are designed to help delegates implement new valuation techniques and to learn from empirical experience. Delegates are expected to know how to use Excel at a basic level and should bring a laptop with them.The course is practical and interactive, with delegates encouraged to ask questions. The techniques taught to delegates are intended to be of immediate practical use in the workplace.This comprehensive training course designed to provide delegates with an understanding of the following:

• Different corporate valuation techniques and their application using Excel
• Qualitative factors affecting valuation
• The impact of capital structure on valuation
• The impact of corporate finance transactions on valuation, incl LBOs
• Specific valuations eg. high growth, cyclical and distressed companies

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Day 1

Introduction to corporate valuations

1. What is business valuation
2. Purpose and extent of the valuation
3. Basis of valuation
4. Value spectrum for M&A
5. Three approaches to business valuation

• Income based approach
• Key focus of valuation – WACC, growth, size
• The FCF perpetuity valuation formula; single and double period
• The key value driver valuation formula
• Due diligence
• Case studies: valuing companies using the above formulae
• The CAPM; unlevered and levered betas, risk premia, tax shields and WACC
• Explicit forecast period vs. continuing value period
• Corporate Valuation – Techniques
• Assessing the terminal value (multiple or perpetuity method) based on Gordon Growth Model
• Importance of final year forecasts
• Calculating NPV and IRRs
• Comparing valuations using multiples vs. DCF
• Advantages and drawbacks of each valuation method
• Case studies: modelling in Excel to produce DCF valuations; reconciling to multiple valuations

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Day 2

Introduction to corporate valuations

• Valuations based on multiples
• Choosing comparable companies
• Trading multiples vs. Transaction multiples
• Pros and cons various multiples: PE, PEG, EV/EBITDA/EBIT/ Revenue
• Cleaning up the reported results to derive underlying performance
• Reconciliation of multiple valuations to the key value driver formula
• Earnings vs. cashflow
• Case studies: valuing companies using multiple analysis
• Valuations based on net assets based
• Application of net assets based approach
• Understand key on and off balance sheet items and order of realization

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About the workshop leader

Herison Ng, CFA, CVA, Partner, Transaction Advisory Services, Ernst & Young Indonesia

Professional Experience

• Currently leading the Valuation, Modelling and Economics sub service line within Ernst & Young Indonesia.
• Responsible for generating new business opportunities and identifying business development opportunities.
• Responsible in providing engagement team leadership in fostering an open and inclusive environment and effectively leading and motivating teams with diverse skills levels and from a variety of backgrounds.

Project Experience

• Assisted a major MRO player in Indonesia in relation to the potential joint venture and Initial Public Offering on the Indonesia Stock Exchange
• Assisted a key port operator player in Indonesia in relation to a concession extension negotiation
• Successfully assisted a state owned enterprise in relation to a USD100 million Initial Public Offering on the Indonesia Stock Exchange