Summary
The integrated theory of business valuation provides a conceptual framework for disciplined analysis of valuation questions. Too often, valuation analysts are tempted to view individual components of a valuation assignment on a piecemeal basis. Adhering to the integrated theory helps valuation analysts develop base valuation conclusions, discounts, and premiums that are rooted in a shared perspective of the subject company and the subject ownership interest. In Part 1 of the series, Chris Mercer and Travis Harms described the integrated theory conceptually. The discussion was rooted in careful definitions of cash flow, risk, and growth at the various levels of value. In this event, they take a more practical turn, exploring how the conceptual framework of the integrated theory manifests itself in the primary methods analysts use to derive indications of value. Specifically, the speakers will examine how valuation analysts calculate enterprise cash flows for use in the income approach, how market participants assign and quantify risk in deriving the discount rates used in the income approach, address the guideline public company method under the market approach using the integrated theory to explain how to draw proper analogies between cash flow, risk, and growth attributes of the subject enterprise and those same attributes of the selected guideline companies, and consider the unique challenges market participants face when confronted with guideline transaction data (what the data do and do not tell us about how the transacting parties were evaluating cash flow, risk, and growth attributes of the target company).
Valuing Enterprise Cash Flows
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