...Private Equity vs Public Equity * Private Equity and Public equity ownership represent very different packages of costs and benefits. * In the current environment raising money private makes sense because valuations appear to be quite high. * The incentive to invest privately is that early stage investors are allowed to cash out of their investments. This forces investors to need a liquidity event. * A strategic acquisition rather than an IPO may be the preferred exit opportunity. * Private markets on the other hand, may benefit here since going public is a burden. * ETFs, Mutual Funds, and other retail investment vehicles now invest into these private transactions. This gives the retail investor a way to invest in private markets. This will make going public a sub optimal exit strategy. Why bother to do an IPO? * If a company can stay private and find money and liquidity why do an IPO? IPOs have the following problems for company founders. * 1) Six month lockup and continual restriction on stock sales. 2) Expensive and burdensome reporting regulations. 3) Having to manage your company quarter to quarter and worry endlessly about meeting analyst expectations rather than concentrate on strategic milestones. Cost of an IPO * IPOs can be a very long and expensive process. Obtaining SEC approval is a 6-9 month process. * Costs such as legal counsel, auditors, underwriters, and registration fees, all add up fast. These costs...
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...this paper is to examine the various valuation factors that affect the financial performance of a particular company. This paper also includes research which involves a current literature review about the possible causes of both positive and negative outcomes of a company’s financial performance. The methodology used is qualitative research. The major findings entail that the nature of the business and its history is the greatest factor that most likely should be the central focus of the business itself. It can then be realized that the company’s value can be best assessed once it is determined that it has stayed in the industry for a long period of time. Introduction The business industry, above all else, is considerably one of the most complicated sectors of the economy. Nonetheless, businesses are, up to the extent, concentrated on providing the best to their customers and at the same time, on performing well in the market. So to say, the primary goal of any company is to become globally competent and successful in the industry. This objective is what mostly keeps the companies driven to continuously improve itself, its processes, its products and its services. In light with all of this, the value of companies is chiefly influenced by several factors. These factors somehow contribute to the outcomes of the financial performance of the company. More than that, these aspects are deemed to be the most important that every company in the business industry always put a...
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...Valuation Fundamentals Table of Contents www.finaticsonline.com Table of Contents > > > > > Introduction – Concept of Fair Value – Who uses Valuation? Valuation & Wealth Maximization Valuation Approaches Valuation Methods Is there a ‘Best’ method? > > Which method is best suited ? – Public vs Private Company – By Scenario – By Sector Valuation FAQs – General – DCF – Comparables Press Alt, W, F for maximizing viewing area Equity Valuation Fundamentals Introduction – Concept of Fair Value www.finaticsonline.com At Finatics, we define Equity Valuation as “A process that involves determining „Fair Value‟ of a company‟s equity in order to assist buy/sell decisions for the purpose of Financial or Strategic Investment ” So what is Fair Value of an investment? How should the worth of an Investment be determined ? …(Contd) Put Simply, Fair Value is the price at which, one will get the desired rate of return when the investment is sold to a willing & able buyer. The worth of an investment is determined by whether it is meant for long term use to generate returns (i.e. Strategic Investment) or for resale when the „right price‟ or „fair value‟ is achieved (Financial Investment). The purpose of Valuation is to determine a fair value range of an investment (or capital asset) using one or more of several available techniques As discussed, investment related demand will be driven by expected return resulting...
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...publicly traded by companies. The well-known corporations such as Ford Motor, Johnson & Johnson, and Citibank are companies that trade freely on stock exchange, The New York Stock Exchange and NASDAQ. Private Equity- Private Equity covers a broad range of investment categories that come into play at different stages of a company and its life cycles. Discuss the main differences between an angel investor and a venture capital (VC) investor. Angel investors are individuals of high-net value who seek to help entrepreneurs accomplish their goals. They represent a good option when family and friends are not available and when other methods of racing capital are not desirable or feasible. Angle investors are high-net-worth people, may have a social agenda, and require an ROI of 20-35%. I also liked the breakdown of Angels Investors on pg. 194, of our text. Table 8-3 Typical Profile of Angels Investors Average number of members in an angel group---------------------------------------10-25 Average group investment per year-------------------------------------------------------$2million to $55million Average group investment in a start-up---------------------------------------------------$350,000 Percentage of companies funded, out of all that presented----------------------------33% Estimated total invested per year by angels---------------------------------------------$54 billion Venture Capital (VC) – “This is a broad subcategory of private equity, typically...
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...Inc. (DLA) Corporate Overview Delta Apparel, Inc., through its subsidiaries, operates as an international design, marketing, manufacturing, and sourcing company that features a portfolio of branded and private label activewear apparel and headwear. The company primarily offers casual and athletic products for men, women, juniors, youth, and children under the Soffe, The Cotton Exchange, Intensity Athletics, Junk Food, and The Game brand names. It also markets apparel garments for the entire family under Delta Pro Weight, Delta Magnum Weight, Quail Hollow, Healthknit, and FunTees brand names. In addition, the company engages in designing, marketing, and manufacturing private label custom knit t-shirts primarily to branded sportswear companies. It sells its products to specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, screen printers, private label accounts, college bookstores, and the United States military. The company also sells its products directly to consumers on its Web sites at soffe.com, junkfoodclothing.com, saltlife.com, and deltaapparel.com. It has operations primarily in the United States, Honduras, El Salvador, and Mexico. Delta Apparel, Inc. was founded in 1999 and is headquartered in Greenville, South Carolina. Discounted Cash Flow Valuation I use the FCFF model to evaluate Delta’s price. The three-stage model assumes that the firm will have an impressive growth first, and then has a more moderate...
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...areas currently account for only 9% of sales. - Reduction in cost structure, gross margins are currently at 34%. SWOT ANALYSIS Strength Nantucket Nectars have a unique all natural product line-up. They have a strong management team who has developed a strong brand. The management has been astute in exploiting the small and rapidly changing market opportunities in the single-serve section of the new age beverage market. They can create value for any large player who wants to play in the single-serve products market. Weakness: The company has limited financial resources and this has become evident in its limited access to larger distribution channels. The company is unable to access the supermarket channels with only a 1% sale via this channel versus 55% for the overall New Age beverage Market. Sales by Nantucket Nectars have been mainly through other channels invariably cutting of a significant portion of potential consumers. The company has limited futures contracts and relies heavily on expensive spot market for sourcing its major raw material, thereby impacting its margins severely. Opportunity Nantucket Nectars have received unsolicited expression of interest for a part sale from Ocean Spray, Triac and Pepsi. Threat The intensity of competition in the beverage industry is extremely high. The competition is based on product innovation, increased advertising, and price cutting and intense rivalry in the marketing channels. Currently, Nantucket Nectars has been successful...
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...and Valuation FBE 529 Monday, Wednesday Class Instructor: Lloyd Levitin Time and Place: 3:30 – 4:50 P.M.; JKP 212 Office: Accounting 301E Office Hours: M, W: 2:15-3:15 P.M.; T: 5-6 P.M., and by appointment Office Phone (USC): 213-740-6524 Office Phone (Home): 310-858-0260 Email Address: levitin@marshall.usc.edu (preferred method of communication; please indicate on your email communication the class you are in and when it meets). Teaching Assistant: Brian Kaemingk (email: brian.e.k@gmail.com Course Website: On Blackboard http://blackboard.usc.edu COURSE OBJECTIVE Understanding what determines the value of a firm and how to estimate that value is a prerequisite for making rational business decisions. Entire industries (investment banking, securities analysis, and consulting) have grown prosperous providing valuation skills to investors and managers. The objective of this course is to give a general grounding in the valuation approaches used by successful practitioners. We cover discounted cash flow models, market multiple models, as well as specialized models used for M&A transactions and LBOs. We focus on valuation of businesses at the divisional and corporate levels. The course emphasizes practical and “real world” applications of valuation methodologies. The course is of interest to those contemplating careers in investment banking, security analysis, consulting, private equity...
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...of the Private Equity (PE) companies of Bangladesh have increased their investments significantly. Easy access to capital, as well as inexpensive leverage, has led to an increase in activity of PE buy-outs of market leaders with strong cash flow. The competition for objects that are for sale has amplified, which has resulted in price increases of the objects. The higher prices offered by the PE companies also affects the number of initial public offerings (IPO) on the Dhaka and Chittagong Stock Exchanges. One reason for the small number of current IPOs is that the objects simply have been valued higher by PE companies than they would do in an IPO. PURPOSE: The purpose with this thesis is, from a shareholder’s point of view, to analyze and describe the reasons of making an IPO instead of selling to a PE company. METHODOLOGY: Since the research is based on gathering and understanding information regarding specific persons’ choices and motives, a qualitative approach has been conducted. CONCLUSION: All the main motives of the IPO could have been achieved by selling to PE Company, except the motive of attaining share liquidity. One of the attractive reasons for share liquidity is that shareholders easily can choose between reducing ownership, increasing ownership or remain with existing shares. Another attractive reason is that financial institutions normally become shareholders, which in turn increases the credibility of the company. Eight out of the ten companies had parallel...
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...some serious problems. By early 2000, Krasnow and the management team had decided to put the growth strategy on hold and focusing on operations. Later, they changed their focus on Improving facility efficiency and quality and Building up volume in existing networks. After a while, their operating begins to stabilized and back to track. By mid-2003, they hire a new CEO, which is very professional and suitable for the business. They the made more changes on their strategy. The most important is they transitioning residential delivery from an operations focus to a sales and service focus. Their business model is good I think. Because dry-wash industry is highly fragmented and the traditional business cannot satisfy customer needs. And the company is using a new business model which can well solve the problem and improve the profitability of the business. And the company’s strategy is more of a trail and error...
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...Overview of the Industry As a manufacture of private label personal care products, Hansson Private Label, Inc. has a considerable amount (28%) of market share in its specific industry. However, private labels as a whole constitute less than 19% in the entire personal care industry. Therefore, growth of HPL depends on the growth of the industry and more importantly the growth of private label component within the industry. In terms of the personal care industry, market growth will not improve significantly in the future. As proven in the past four years, unit volumes in the industry increases less than 1% in each year and the dollar sales growth was only driven by modest price increases. Therefore, the opportunity for private labels will come in the form of obtaining a bigger slice of the pie. In other words, private labels will need to take market shares away from the brand names by penetrating deeper into a slowly expanding market. Brand name manufactures still control the majority of the personal care market. However, private labels have been gaining momentum in market shares as a result of greater consumer acceptance. The economic downturns have fostered a trend of thrifty spending among consumers. The private labels, with lower price and improving quality, offer an appealing alternative and substitute to the more costly brand names. Therefore, despite the whole personal care market size being quite fixed, the private labels have the prospect of growing within the...
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...four different methods of valuation, with a focus on their advantages and limitations. Answer: There are several methods of valuations, below are just a few: Discounted cash flow analysis (DCF) – this is considered one of the most thorough methods to value a company due to the fact that relies on free cash flows. There are two ways using the DCF method one, using the adjusted present value or the weighted average cost of capital, which shows a company how much capital is required for future income flow. Using this method gives us a more realistic thing to an intrinsic stock value, ratios may not give investors a clear value if the market is over/under valued. Some disadvantages would be that it’s based on future projections and assumptions if analysis do not have the abilities to make confident and sound future projection then this method could lead to disastrous future results. This method also viewed as a moving target and only for short term investing, requiring constant analysis and modifications. Comparable Transaction Method – this method focuses on analyzing similar transactions in the past and the market values that are similar to the company that is being purchased or looking at being purchased. Companies can look at several transactions of similar companies to help them determine a value. This value is real data and not based on future projections. Some disadvantages of this method would be the lack of financial data among private companies and past transactions. ...
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...of the stock market also, besides the areas of their businesses, with share prices in multiples of current levels. Giving company to these and many other once blue-chip stocks in their free-fall towards near-zero levels are macroeconomic indicators like interest rate, inflation and GDP growth rates, not only in the world's biggest economy, the USA, but also at many other places. People have started talking of a deflation scenario -- where inflation slips into negative territory -- even in India, while many developed economies have already seen their GDP growth rates dipping into the red. Mukesh Ambani-led Reliance Industries lost Rs 14,872 crore in the previous week from its market capitalisation with the scrip losing over 7 per cent to settle at Rs 1,170.55 at the end of Friday's trade on the Bombay Stock Exchange. RIL's market cap stood at Rs 1,84,221 crore last week as against Rs 1,99,093 crore in the previous week. The coveted club of top 10 firms, which comprises four private entities and six public sector companies, lost Rs 55,932 crore during the week with market cap of Rs 96,72,202 crore. Last week, the valuation of the club stood at Rs 10,23,135 crore. With the market meltdown due to heavy selling by Foreign Institutional Investors in the past week, all the top 10 companies witnessed an erosion in their market valuations. Market analysts said that FIIs have now turned to selling big chunks of their investment in blue chips which led to the tumbling...
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...firm to create a new firm to managers of a firm acquiring the firm from its stockholders and creating a private firm. We begin this section by looking at the different forms taken by takeovers. 1. TAKEOVER A corporate action where an acquiring company makes a bid for an acquire. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares. There are three types of takeovers: 1.1 Friendly takeovers A "friendly takeover" is an acquisition which is approved by the management. Before a bidder makes an offer for another company, it usually first informs the company's board of directors. In an ideal world, if the board feels that accepting the offer serves the shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. 1.2 Hostile takeovers A "hostile takeover" allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually asimple majority...
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...Principles Board) after the recommendation of the Wheat committee in 1972. The IASB is a private board created in 1973 to create accounting standards to be observed worldwide. Beginning with the Norwalk agreement in 2002 the FASB and the IASB committed both entities to making mutually compatible standards both foreign and domestic. The rules of the FASB/IASB only govern financial accounting: how a company communicates with its investors and debtors. The Norwalk agreement also commits the two boards to coordinate the two programs. The Sarbanes-Oxley Act of 2002 authorized the SEC to recognize the rules of the private boards as long as they consider international convergences on accounting principles to protect the investors. The FASB focuses on U. S. accounting standards and the IASB focuses on global accounting standards. “The IASB and FASB are working together to combine various accounting and financial reporting requirements developed by both entities into single international financial reporting standards.” (S. Carty). The two boards are making one standard because having different standards made it difficult for international companies to know which standard to follow. Having on standard made it easier for companies to follow and make financial reporting transparent. The two boards do have major differences even though they are working together. The FASB is a private non-governmental division of the SEC and receive funding from them. The FASB board is comprised...
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...debt that is maturing in the next six to twelve months and to finance its intended growth into the Asian (especially Chinese) markets Alternative Solutions: #1) IPO: (Initial Public Offering) Cons: High tax and pricing "We received little demand from our (retail) clients for the (Prada) shares. It might be the 12.5 percent tax that scared them away and the pricing itself was expensive when it compared with its peers," said Alfred Chan, chief dealer at Cheer Pearl Investment. "Unlike institutions, our retail clients hold the shares for a much shorter term," he added. "Consumers are willing to pay a very high premium chasing after brands, but it's not the case for investors. Investors are concerned about reasonable valuation and pricing" -Conita Hung, head of equity - research of Delta Asia Financial. Prada warned in its IPO prospectus that Hong Kong residents would be liable to a withholding tax on dividends on top of the capital gains tax. Hong Kong is known for its low-tax regime, with no capital gains taxes, no sales tax or value added tax (VAT) and has among the smallest income taxes on salaries. Apart from the tax issues, retail appetite for Prada may have been reduced due to volatile global markets in recent weeks “There’s going to be quite a lot of pressure on Prada,” said Espinasse, the author of IPO: A Global Guide. “The fact that retail investors haven’t gone...
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