J.P Morgan & Company was advised by Brasil Investimentos to give a statement regarding a sale or restructuring of its subsidiary Paginas Amarelas – the telephone directory business. The responsibility for the valuation of business of Paginas Amarelas was given to Juan Lopez, a new associate of JP Morgan’s Latin America M&A Group who had better understanding of the business markets where they were conducting their businesses.. Juan Lopez estimated the future cash flow (in US$ as requested by the client) of the operations in the three Latin American countries (Argentina, Brazil and Chile) where they were competing.

After calculating the future cash flow, Lopez estimated the weighted average cost of capital (WACC) to find out the target rate of return for each country operation through which he determined the DCF value of the three country operation as well.

JP Morgan Company was basically a global financial service provider and considered as a major global player in the investment – banking industry. JP Morgan generally made use of three approaches-DCF (Discounted Cash Flow) method, trading multiples and transaction multiples for estimating the valuation of the company.

The Argentine subsidiary achieved 33 percent of Paginas Amarelas total net revenue whereas Brazil and Chile accounted for 52 and 15 percent of total revenue respectively. In these three countries the telephone companies were state-owned and in monopoly position. The privatization of state-owned companies ended the operation of monopoly marketers and it resulted in creating superior services with lower charges which was followed by a remarkable increase in the number of lines. This privatization process also allowed the entrance of international companies into the local market of these three countries and increased competition and reduced