corporate valuation training by JP Morgan
APRIL 2010
ST R I C T L Y
P R I VAT E
AN D
C O N F I DEN T I AL
INTRODUCTION TO VALUATION
Presented by Tristan Fitzgerald
Overview of the session
Introduction
Discounted cash flow (“DCF”)
Trading multiples
I N T R O DU C T I O N
T O
VAL U AT I O N
Transaction multiples
1
What does the term “value” mean?1
The Oxford Dictionary definition
“the material or monetary worth of a thing; the amount at which it may be estimated in terms of some medium of exchange or other standard of a like in nature”
It is important to note that there is no general statutory definition of value
Valuation is an art, not a science2
I N T R O DU C T I O N
T O
VAL U AT I O N
In practice, we rely heavily on experience and judgement
1
2
Extracts taken from ‘The Valuation of Business, Shares and Other Equity’; Wayne Lonergan
Gold Coast Selection Trust v. Humphrey; 1948
2
Why valuation is important?
Acquisitions
Divestitures
How much should we pay to buy the company? How much should we sell our company/division for?
Fairness opinions
Research
Is the price offered for our company/division fair (from a financial point of view)?
Should our clients buy, sell or hold positions in a given security?
Valuation
Public equity offerings I N T R O DU C T I O N
T O
VAL U AT I O N
Hostile defense
For how much should we sell our company/division in the public market?
Is our company undervalued/vulnerable to a raider
Debt offerings
New business presentations Various applications
What is the underlying value of the business/assets against which debt is being issued?
3
J.P. Morgan uses a number of valuation methodologies
Valuation methodologies T O
I N T R O DU C T I O N
Comparable transactions analysis
“Public Market
Valuation”
VAL U AT I O N
Publicly traded comparable companies analysis
“Private Market
Valuation”
“Intrinsic” value of
ST R I C T L Y
P R I VAT E
AN D
C O N F I DEN T I AL
INTRODUCTION TO VALUATION
Presented by Tristan Fitzgerald
Overview of the session
Introduction
Discounted cash flow (“DCF”)
Trading multiples
I N T R O DU C T I O N
T O
VAL U AT I O N
Transaction multiples
1
What does the term “value” mean?1
The Oxford Dictionary definition
“the material or monetary worth of a thing; the amount at which it may be estimated in terms of some medium of exchange or other standard of a like in nature”
It is important to note that there is no general statutory definition of value
Valuation is an art, not a science2
I N T R O DU C T I O N
T O
VAL U AT I O N
In practice, we rely heavily on experience and judgement
1
2
Extracts taken from ‘The Valuation of Business, Shares and Other Equity’; Wayne Lonergan
Gold Coast Selection Trust v. Humphrey; 1948
2
Why valuation is important?
Acquisitions
Divestitures
How much should we pay to buy the company? How much should we sell our company/division for?
Fairness opinions
Research
Is the price offered for our company/division fair (from a financial point of view)?
Should our clients buy, sell or hold positions in a given security?
Valuation
Public equity offerings I N T R O DU C T I O N
T O
VAL U AT I O N
Hostile defense
For how much should we sell our company/division in the public market?
Is our company undervalued/vulnerable to a raider
Debt offerings
New business presentations Various applications
What is the underlying value of the business/assets against which debt is being issued?
3
J.P. Morgan uses a number of valuation methodologies
Valuation methodologies T O
I N T R O DU C T I O N
Comparable transactions analysis
“Public Market
Valuation”
VAL U AT I O N
Publicly traded comparable companies analysis
“Private Market
Valuation”
“Intrinsic” value of