Methods of Valuation for Mergers and Acquisitions

Topics: Discounted cash flow, Free cash flow, Net present value Pages: 2 (673 words) Published: April 27, 2013
Methods of Valuation for Mergers and Acquisitions
This note talks about the methods that can be used to value the companies. It makes a detailed description and definition of discounted-cash-flow. It also gives theories and approaches about other methods and techniques of evaluation, market value and cost. First of all, it is important to talk about the Discounted-Cash-Flow Method, this theory shows and describes the value of the company. This happens by computing the present value of the cash flows in the life cycle of the company or organization. Anyways, according to a company that it has an infinite life. The theory is divided into two, the first is the forecast period and the second is the terminal value. The cash-flow forecast must be grounded in industry and organization forecast. It is important to mention that the forecast period is the same of the normal years during what the analyst estimates free cash flow that are essential for creating a value. To talk about the terminal value, one should say that it is the reflection that present the value of the cash flows happened to take place all over the years. The terminal value is known to be calculated in the final year. Another thing to talk about which is the discount rate, this one reflects the weighted average of the chances and opportunities of investors cost on the comparable investments. Anyways, to be able to avoid the penalizing taking place in the investment opportunity. The WACC can reflect the incorporate the target of weights of the finance going forward during the year. There is no doubt that there are some considerations to take for the terminal value estimation, as the terminal value contributes in the bulk of the total cash-flow value. The relationship between both the enterprise and terminal value is a typical and default of a company because of the constant nature of the life of a business. The author mentioned in this note also the market multiplies being an alternative estimator of...
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