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The genetic workflow miner
No full textTHE GENETIC WORKFLOW MINER
The genetic workflow miner (1)
Introduction (5)
Theoretical Background (6)
Process Science (6)
Process Discovery & Event Logs (7)
Process Mining Algorithms (7)
Conformance Checking (9)
Process Model Quality Dimensions (10)
Petri Nets (11)
Genetic Algorithms (13)
Neuro Evolution of Augmenting Topologies (15)
Fitness Sharing & Speciation (15)
Dynamic Genome Encoding (16)
Multi Objective Optimization (17)
Summary (18)
Related Work (19)
Genetic Process Mining (19)
Petri Nets (19)
Causal Matrices (20)
Process Trees (22)
Other Graph-Based Representations (23)
BPMN (24)
Evolving Petri Nets (25)
Problem Statement and Approach (28)
Process Mining as an Optimization Challenge (28)
The Case for Genetic Process Mining Algorithms (29)
Steering Evolution (30)
The Exploration-Exploitation Dilemma (32)
New Contributions to Genetic Process Mining (34)
Internal representation using dynamically growing Petri nets (34)
Niched selection (35)
Parameter evaluation (35)
Hypotheses (35)
Implementation (38)
Genetic Encoding Scheme (39)
Mutations (41)
Connecting Places and Transitions (41)
Connecting Transitions (42)
Extending Places and Transitions (42)
Pruning leaves (43)
Removing Arcs (43)
Flipping Arcs (43)
Splitting Connections (43)
Guided Mutations (43)
Crossover (46)
Creating the Initial Population (48)
Fitness Function (49)
Aggregated Replay Fitness (50)
Remaining Score (52)
Over enabled transitions (53)
Number of Arcs (53)
Sink Score (54)
Fraction of Task Transitions (54)
Selection Strategies (54)
Truncation (54)
Roulette Wheel Selection (56)
Speciated Selection (58)
Program Architecture (63)
Results and Evaluation (65)
Results (65)
Running Example Log (65)
PDC 2022 & 2024 Log (67)
Summary of Results (71)
Fitness Function (72)
Optimizing Fitness Metric Weights (72)
On the Omission of a Generalization Metric (73)
Anchoring Metrics to Replay Fitness (74)
Applying a Replay Fitness Multiplier (76)
Fitness Function Ablation Study (76)
Selection Strategies (77)
Comparing Truncation, Roulette and Speciation Selection (78)
Truncation Selection in Detail (82)
Roulette Selection in Detail (84)
Speciation Selection in Detail (85)
Mutations (89)
The Impact of Mutations (89)
Analyzing the Sequence of Mutations in a Single Run (91)
Evaluating Guided Mutations (92)
Performance and Efficiency (93)
Population Size Effects on Convergence (93)
Token Replay Runtime (94)
Algorithm Runtime (95)
Summary of Evaluation Results (96)
Discussion (98)
Critical Evaluation of the GWFM Approach (98)
Limitations and Threats to validity (100)
Further Research (101)
Conclusion (102)
Appendices (104)
Event Logs (104)
Variants of Running Example Log (104)
PDC Base Log with Dependent Tasks (104)
Target Model PDC 2022 (104)
Results PDC 2022 (105)
Target Model PDC 2024 (105)
Results PDC 2024 (105)
PDC Base Log with Loops (106)
Target Model PDC 2022 (106)
Results PDC 2022 (106)
Target Model PDC 2024 (106)
Results PDC 2024 (107)
PDC Base Log with Hidden Transitions (107)
Target Model PDC 2022 (107)
Results PDC 2022 (107)
Target Model PDC 2024 (108)
Results PDC 2024 (108)
PDC Event Log Evaluation Times (108)
Parameters (109)
Parameter Generation Program (109)
Parameters of Final Tests (110
Essays in short-selling and macroeconomic announcements
No full textESSAYS IN SHORT-SELLING AND MACROECONOMIC ANNOUNCEMENTS
Essays in short-selling and macroeconomic announcements (3)
Acknowledgments (v)
Summary (vii)
Short Sales and the Cash Flow Channel: Evidence from FOMC Announcements (2)
Introduction (2)
Short-Selling Dynamics Around FOMC Announcements (8)
Short-Selling on the Equity Market (8)
FOMC Meetings and Economic Shocks (9)
Hypotheses (11)
Data and Methodology (13)
Data (13)
Methodology (16)
Descriptive Statistics (18)
Results (19)
Short-Selling Volume Around FOMC Meetings (20)
Short Interest around FOMC Meetings (32)
Robustness Tests (41)
Conclusion (45)
Acknowledgments (46)
Unwinding Short-Sale Bans does not Unwind their Effects (48)
Introduction (48)
Overview of the 2020 Short-Selling Ban (54)
Data and Methodology (56)
Data and Variable Definitions (56)
Methodology (58)
Descriptive Statistics (59)
Results (62)
Market Liquidity (62)
Stock Prices and Volatility (70)
The COVID-19 Stringency Index (74)
Short Positions by Institutional Investors (76)
Earnings Announcements (78)
Conclusion (82)
Acknowledgments (84)
Firms' Inflation Exposure and Monetary Policy Shocks (86)
Introduction (86)
Overview of the Inflation Exposure and Monetary Shocks (92)
Inflation Exposure (92)
Monetary Shocks (94)
Data and Methodology (95)
Data (95)
Methodology (97)
Results (102)
Stock Market Reaction to Inflation Shocks (102)
Main Sample Analysis (106)
Additional Analysis: COVID-19 Period (107)
Additional Analysis: Great Financial Crisis Period (112)
FOMC Announcement Days (115)
Conclusion (119)
Acknowledgments (120)
Appendix to Firms' Inflation Exposure and Monetary Policy Shocks (122)
Bibliography (128
Navigating information asymmetry
No full textNAVIGATING INFORMATION ASYMMETRY
Navigating information asymmetry (1)
1 Introduction (8)
1.1 Problem Statement (8)
1.2 Relevance and Research Question (9)
2 Literature Review (11)
2.1 Potential negative Consequences of Information Asymmetries (IAs) in the Investment Environment (11)
2.1.1 Adverse Selection (11)
2.1.2 Moral Hazard (12)
2.2 Investment Criteria for Venture Capitalists (13)
2.2.1 Personality of Entrepreneurs (14)
2.2.2 Experience and Qualifications of the Entrepreneur (15)
2.2.3 Product or Service (16)
2.2.4 Market Characteristics (16)
2.3 Strategies for mitigating Risks associated with Information Asymmetries (17)
2.3.1 Third-Party Validation (17)
2.3.2 Focussing on predefined Markets (19)
2.3.3 Heuristics and Intuition (20)
2.3.4 Signalling (22)
2.3.5 Screening and Due Diligence (23)
2.3.6 Staged Financing (25)
2.3.7 Contracts (27)
2.3.8 Seats on the Board of Directors (29)
3 Methodology (30)
3.1 Research Design (30)
3.2 Participants and Sampling (32)
3.3 Interview Guide (33)
3.4 Analysis (34)
4 Results (36)
4.1 Experience with and Relevance of Information Asymmetries (36)
4.1.1 Ubiquity and general Perception of Information Asymmetries (37)
4.1.2 The Nature of Asymmetries (38)
4.1.3 Investor Expectations and Reactions (38)
4.2 Areas where Information Asymmetries are most prevalent (39)
4.2.1 Competition (39)
4.2.2 Financials and Sales (40)
4.2.3 Product (41)
4.2.4 Team (41)
4.2.5 Other Areas (42)
4.3 Strategy to minimise Information Asymmetry – Third Parties (42)
4.3.1 Customers (42)
4.3.2 (Co-) Investors (43)
4.3.3 Network and Experts (44)
4.3.4 Others (45)
4.4 Strategy to minimise Information Asymmetry – Predefined Markets (45)
4.5 Strategy to minimise Information Asymmetry – Heuristics and Intuition. (46)
4.6 Strategy to minimise Information Asymmetry – Signalling (47)
4.6.1 Education (47)
4.6.2 Industry Experience and Network (48)
4.6.3 Team-related (48)
4.6.4 Others (49)
4.7 Strategy to minimise Information Asymmetry – Due Diligence (49)
4.8 Strategy to minimise Information Asymmetry – Staged Financing (51)
4.9 Strategy to minimise Information Asymmetry – Contracts and Seats in Board (52)
4.10 Further Strategies to minimise Information Asymmetry (53)
4.11 Tolerance for Information Asymmetries (54)
4.12 Missed Opportunities due to excessive Caution (55)
5 Discussion (55)
5.1 Integration of empirical Findings with existing Literature (56)
5.1.1 Experience with and Relevance of Information Asymmetries (56)
5.1.2 Areas where Information Asymmetries are most prevalent (56)
5.1.3 Strategies for Mitigating Information Asymmetries (57)
5.1.4 Tolerance for Information Asymmetries (60)
5.1.5 Missed Opportunities due to excessive Caution (61)
5.2 Implications for Investment Decision-Making and theoretical Contributions (61)
5.2.1 Implications for Investment Decision-Making (62)
5.2.1.1 Enhanced Vigilance and targeted Due Diligence (62)
5.2.1.2 Critical and contextual Use of Mitigation Strategies (62)
5.2.2 Theoretical Contributions (64)
6 Conclusion (65)
7 Limitations (67)
8 Future Research (68)
9 Bibliography (69)
10 Appendix (82)
10.1 Interview 1 (VC) (82)
10.1.1 Transcript Interview 1 (82)
10.1.2 Initial Coding Interview 1 (Phase 2) (90)
10.2 Interview 2 (CVC) (93)
10.2.1 Transcript interview 2 (93)
10.2.2 Initial Coding Interview 2 (Phase 2) (107)
10.3 Interview 3 (VC) (110)
10.3.1 Transcript interview 3 (110)
10.3.2 Initial Coding Interview 3 (Phase 2) (128)
10.4 Interview 4 (CVC) (131)
10.4.1 Transcript interview 4 (131)
10.4.2 Initial Coding Interview 4 (Phase 2) (142)
10.5 Interview 5 (VC) (145)
10.5.1 Transcript interview 5 (145)
10.5.2 Initial Coding Interview 5 (Phase 2) (153)
10.6 Interview 6 (CVC) (155)
10.6.1 Transcript interview 6 (155)
10.6.2 Initial Coding Interview 6 (Phase 2) (165)
10.7 Interview 7 (CVC) (166)
10.7.1 Transcript interview 7 (166)
10.7.2 Initial Coding Interview 7 (Phase 2) (178)
10.8 Interview 8 (VC) (180)
10.8.1 Transcript interview 8 (180)
10.8.2 Initial Coding Interview 8 (Phase 2) (190)
10.9 Interview 9 (CVC) (191)
10.9.1 Transcript interview 9 (191)
10.9.2 Initial Coding Interview 9 (Phase 2) (206)
10.10 Interview 10 (VC) (208)
10.10.1 Transcript interview 10 (208)
10.10.2 Initial Coding Interview 10 (Phase 2) (214)
10.11 Defined Themes after Reflexion and their Definition (Phase 3-5) (216)
10.11.1 Experience with and Relevance of Information Asymmetries (216)
10.11.2 Areas where Information Asymmetries are most prevalent (217)
10.11.2.1 Competition (217)
10.11.2.2 Financials and Sales (217)
10.11.2.3 Product (218)
10.11.2.4 Team (218)
10.11.2.5 Others (218)
10.11.3 Strategy to minimise Information Asymmetry – Third Parties (218)
10.11.3.1 Customers (219)
10.11.3.2 (Co-) Investors (219)
10.11.3.3 Network and Experts (219)
10.11.3.4 Others (220)
10.11.4 Strategy to minimise Information Asymmetry – Predefined Markets (220)
10.11.5 Strategy to minimise Information Asymmetry – Heuristics and Intuition (221)
10.11.6 Strategy to minimise Information Asymmetry – Signalling (222)
10.11.6.1 Education (223)
10.11.6.2 Industry Experience and Network (223)
10.11.6.3 Team-Related (223)
10.11.6.4 Others (223)
10.11.7 Strategy to minimise Information Asymmetry – Due Diligence (224)
10.11.8 Strategy to minimise Information Asymmetry – Staged Financing (225)
10.11.9 Strategy to minimise Information Asymmetry – Contracts (226)
10.11.10 Strategy to minimise Information Asymmetry – Board Seats (226)
10.11.11 Strategy to minimise Information Asymmetry – Other Strategies for Mitigation (227)
10.11.12 Tolerance for Information Asymmetries (227)
10.11.13 Missed Opportunities due to excessive Caution (228
Wandel: Einfach. Jetzt. Machen!
No full textWANDEL: EINFACH. JETZT. MACHEN!
Wandel: Einfach. Jetzt. Machen! (1)
Abstract (2)
Inhaltsverzeichnis (6)
Darstellungsverzeichnis (9)
1. Einleitung (10)
2. Präfiguration (13)
3. Methodik (23)
4. Feldzugang und Stichprobe (30)
5. Ergebnisse der Analyse (41)
6. Zusammenfassung der empirischen Ergebnisse und der Diskussion (76)
7. Conclusio (80)
8. Literaturverzeichnis (84
The effects of salary distribution on performance in international soccer
No full textTHE EFFECTS OF SALARY DISTRIBUTION ON PERFORMANCE IN INTERNATIONAL SOCCER
The effects of salary distribution on performance in international soccer (1
The role of stakeholders in sustainability reporting
No full textTHE ROLE OF STAKEHOLDERS IN SUSTAINABILITY REPORTING
The role of stakeholders in sustainability reporting (1)
Abstract (2)
Table of figures (4)
List of tables (4)
1 Introduction (5)
2 Methodology (8)
3 Underlying theories and mechanisms (10)
3.1 Stakeholder theory (10)
3.2 Legitimacy theory (11)
3.3 Stakeholder accountability (11)
3.4 Stakeholder engagement vs stakeholder management (12)
4 The role of stakeholders in sustainability reporting (13)
4.1 Stakeholder engagement spectrum (15)
4.2 Overview of the sustainability reporting process (17)
4.3 Drivers of reporting (18)
4.3.1 Influence of stakeholder groups (20)
4.4 Planning and preparation (21)
4.4.1 Stakeholder identification and classification (22)
4.4.2 Materiality assessment (23)
4.5 Revision (28)
4.6 Response (31)
4.6.1 Impact of sustainability report perceptions on stakeholders (33)
4.7 Summary and discussion (35)
4.8 Conceptual framing (41)
4.9 Sustainability reporting standards comparison: The role of stakeholders for GRI, IR and CSRD (45)
4.9.1 The GRI and stakeholder engagement (45)
4.9.2 Integrated Reporting and stakeholder engagement (49)
4.9.3 The CSRD and stakeholder engagement (51)
4.9.4 GRI, IR and CSRD: Similarities and differences regarding stakeholder inclusion (54)
5 Discussion and Implications (55)
6 Limitations (61)
7 Conclusion (61)
References (63)
List of aids used (74
Whistleblowing in der österreichischen Rechtslage (HinweisgeberInnenschutzgesetz)
No full textWHISTLEBLOWING IN DER ÖSTERREICHISCHEN RECHTSLAGE (HINWEISGEBERINNENSCHUTZGESETZ)
Whistleblowing in der österreichischen Rechtslage (HinweisgeberInnenschutzgesetz) (1
Relationships between digital maturity and different facets of well-being in adults
No full textRELATIONSHIPS BETWEEN DIGITAL MATURITY AND DIFFERENT FACETS OF WELL-BEING IN ADULTS
Relationships between digital maturity and different facets of well-being in adults (3
Sustainability collaborations and their effect on retailer and manufacturer brand perception
No full textSUSTAINABILITY COLLABORATIONS AND THEIR EFFECT ON RETAILER AND MANUFACTURER BRAND PERCEPTION
Sustainability collaborations and their effect on retailer and manufacturer brand perception (1
Evaluating new ventures
No full textEVALUATING NEW VENTURES
Evaluating new ventures (2)
This thesis examines the adequacy and limitations of traditional valuation strategies when applied to early-stage startups operating in highly uncertain and dynamic environments. Conventional valuation models such as the Discounted Cash Flow Analysis ... (3)
It appears that there has been a shift toward a hybrid valuation logic, which combines structured models and context-sensitive techniques. Hence, a variety of methods are combined by practitioners based on the availability of data, maturity level, and... (3)
It is also essential to emphasize that the business plan, while recognizing its optimistic nature, serves as a narrative anchor for assessing the strategic coherence of the company, its market readiness, and the credibility of its founders. Furthermor... (3)
Table of Contents (4)
List of Equations (6)
List of Tables (6)
1. Introduction (7)
Startups are a topic of great interest and discussion in both academic and business circles since they are defining new business models for the 21st century. Globalization and the growth of digital technology have led to a rise in entrepreneurship, po... (7)
Although startups are becoming increasingly influential, valuing them remains a particularly challenging task. As opposed to mature companies, they are typically not backed by reliable financial histories and often operate in dynamic, uncertain market... (7)
This thesis examines how traditional valuation models are adapted for startup settings, how startup-specific risks and growth dynamics are managed, and what best practices have emerged in valuation. Using expert interviews and qualitative analysis, th... (7)
1.1. Research Aim and Question (8)
Across a wide range of industries, startups and early-stage ventures have grown significantly in recent years, driving innovation and disruption. As a result of their ability to scale quickly, adapt to emerging trends, and create entirely new markets,... (8)
Especially, financial predictability and the availability of peer data are considered key assumptions in conventional valuation models, including the Discounted Cash Flow Analysis (DCF) and Comparable Company Analysis (CCA). These criteria, however, a... (8)
In particular, there is a gap in understanding how practitioners modify traditional valuation methods to better reflect the unique characteristics of startups (Miloud et al., 2012). Although Miloud et. Al (2012) and Hsu (2007) emphasize the importance... (8)
Thus, this thesis examines how valuation professionals and investors adapt traditional models to account for startup-specific dynamics in practice. It discusses three key limitations of applying traditional valuation procedures to startups: (9)
(a) Cash Flow uncertainty and lack of predictability (9)
(b) Lack of truly comparable firms or market benchmarks (9)
(c) Value creation based on intangible and qualitative factors (9)
To address these challenges, the study examines how valuation professionals and investors utilize more contextual and hybrid approaches to startup valuation. To gain insights into real-world practices, semi-structured expert interviews were conducted ... (9)
Based on these objectives, this study sought to answer the following research question: (9)
In what ways do traditional valuation methods need to be adapted to better reflect the unique risk profiles and growth trajectories of startups in today´s dynamic market environment? (9)
In addition to closing the gap between academics and market practitioners, this thesis contributes to developing a more practical and nuanced approach to startup valuation, one that integrates financial theory with field experience. (9)
1.2. Content (9)
The thesis begins with a brief introduction to startup valuation and its importance, as well as the main research question, objectives, and key terms. A context for the study is established in chapter one by defining the central problem and the scope ... (9)
The following chapter introduces the literature review. The first section offers a theoretical overview of the primary methodologies used for business valuation, including income-based, market-based, and asset-based approaches. It emphasizes the Disco... (9)
Furthermore, a variety of alternatives to these limitations are explored in the thesis, such as the Venture Capital Method, the First Chicago Method, and the Scorecard Method. (10)
A description of the research design is provided in Chapter Three of the study. An overview of the interview process is provided, as well as details on the selection of participants, data collection, and analytical procedures, as well as reliability, ... (10)
A systematic interpretation of the findings from the conducted expert interviews is presented in the empirical part, which sheds light on how valuation professionals cope with the limitations of traditional models, which adaptations are applied in pra... (10)
In the final chapter of the thesis, the main findings are summarized, and prospects are discussed. To conclude, the study suggests future research and suggestions on how startup valuation practices can be further developed to meet the demands of an in... (10)
2. Literature Review (11)
This literature review examines various perspectives on startup valuation, focusing on the applicability and limitations of traditional valuation techniques in the context of high growth and uncertainty. It begins by outlining the conventional valuati... (11)
2.1. Business Valuation: An Overview (11)
Valuation is a key player in the business landscape, holding significant importance in areas such as mergers and acquisitions (M&A), corporate finance, and portfolio management. While the term is widely recognized, many may be unaware of its fundament... (11)
Similar principles can be applied when evaluating a business, as it is based on projections and future expectations. Valuers use widely accepted valuation methods for the objective component of valuation, while the subjective component emphasizes thei... (11)
2.2. Terms and Definitions (12)
This section defines the key terms used throughout the thesis to ensure conceptual clarity. (12)
Startup: An organization considered to be a startup is typically one that is in the process of becoming operational, which is characterized by high uncertainty, rapid growth potential, and an innovative business model (Ries, 2011). (12)
Valuation: The term valuation refers to the process of determining the market value of a business or asset. It is a critical component in investment decisions, particularly when it comes to venture capital, mergers and acquisitions, and initial public... (12)
Traditional Valuation Methods: There are several established methods of valuation, such as the Discounted Cash Flow (DCF) method and comparable company Analysis (CCA), on which this thesis is focused. Early-stage ventures may be restricted in their ap... (12)
Alternative Valuation Methods: By incorporating scenario-based outcomes, qualitative factors, or investor expectations, they aim to better capture the unique risk-return of startups (Montani et al., 2020). (12)
2.3. Understanding Value (12)
In corporate valuation, value is a complex and multifaceted concept that cannot be easily restricted to a single definition. Its classification varies depending on the methodology used, the references considered, and the interpretations proposed (Fazz... (12)
As such, business valuation involves a structured process of analysis, assessments, and evaluations aimed at estimating a company´s monetary value at a given time. It can be seen as the asset value estimation, encompassing fixed and current assets (e.... (13)
To truly understand value in the context of business valuation, it is crucial to differentiate between enterprise value and equity value. On the one hand, an enterprise value (EV) indicates how much a value object’s key assets are worth on the open ma... (13)
In addition, the process of valuing a business is a complex one that requires expertise from several fields. Although attempts have been made to standardize it, a variety of frameworks and unsolved problems remain. Considering that businesses vary in ... (14)
2.4. Traditional Valuation Strategies (14)
To assess the value of a company, analysts use a variety of models, ranging from basic to highly advanced. Even though these models are based on different assumptions regarding the critical factors impacting value, they share certain traits and can be... (14)
2.4.1. Income-Based Approach (15)
A business is frequently valued using the income approach, also known as the Discounted Cash Flow valuation (DCF) or mark-to-model approach, which is further discussed in the following section. This approach assumes that a company´s value comes from i... (15)
2.4.2. Market-Based Approach (15)
By comparing an enterprise´s value to those of similar businesses or securities that have already been sold in the market, the Market-Based approach, also known as the mark-to-market or relative valuation, is used to determine the company´s value. It... (15)
2.4.3. Asset-Based Approach (16)
According to the asset approach, also referred to as the mark-to-cost approach, a company´s value is determined by its balance sheet assets and liabilities. With this approach, there are two possibilities to calculate the equity value. According to th... (16)
The advantages and limitations of each method vary depending on the financial structure, industry, and purpose of valuation. When future earnings are the primary factor driving value, the Income-based approach to valuation is suitable, whereas the mar... (16)
2.5. Key Approaches to Business Valuation (16)
After establishing the fundamental valuation approaches, the following section will provide a more detailed explanation of the most commonly used business valuation approaches. Depending on the characteristics and financial structure of the company, t... (16)
2.5.1. Discounted Cash Flow (DCF) Analysis (17)
In practice, the DCF method is one of the most widely used and well-recognized valuation approaches globally. According to this method, the value of a company is determined by the Net present value (NPV) of its expected future cash flows, which are di... (17)
However, multiple variations of this approach exist, primarily differing in how cash flows are determined and what discount rate is used. Further differences emerge based on the way debt financing, the resulting tax effects and the impact of capital s... (17)
To ensure a consistent and holistic assessment of the company’s overall value, this thesis will employ the Entity Approach using Free Cash Flows. DCF analysis using the Entity Approach with Free Cash Flows involves several steps, including (Majka, 2024): (18)
(a) Develop financial projections (18)
(b) Calculate Free Cash Flows (18)
(c) Select a Discount Rate (18)
(d) Assess the Terminal Value (18)
(e) Consolidating the outcomes of all calculations (18)
Using this approach, equity value is calculated indirectly by subtracting debt value from total enterprise value (Heesen, 2019). In the first step, DCF valuation requires a financial model that forecasts revenue, costs, expenses, and investments to be... (18)
The process continues with forecasting the company´s Free Cash Flows (FCF) over a five- to ten-year period. As already mentioned, in the DCF approach, cash flows can be measured using either the Free Cash Flows to the Firm (FCFF) or Free Cash Flow to ... (18)
Next, and perhaps most important, is the formulation of the discount rate, which involves considering the company´s capital structure and market condition. In most cases, the weighted average cost of capital (WACC) is the rate used, which can cause si... (19)
As shown in the formula below, the cost of equity and the cost of debt are factored into the WACC formula, which accounts for both equity and debt financing when determining the total cost of capital: (20)
Yet again, small adjustments in the perpetual growth rate can have a significant impact on the terminal value and therefore the overall firm valuation. In most cases, this rate is in the range of 0-5%, aligned with the nominal growth rate of the econo... (21)
Lastly, equity value is calculated by allocating the net present value of Cash Flows and Terminal value over the forecasting period. Thus, the Terminal Value is being discounted back to its present value. Following that, the NVPs are summed to derive ... (21)
2.5.1.1. Strengths and Weaknesses of the DCF Approach (21)
To conclude this section, it is necessary to summarize the DCF approach´s key advantages and disadvantages. This method has the strength of requiring a thorough understanding of the future developments and value drivers of a value object. Due to its i... (21)
2.5.2. Multiple-based Approach (22)
An alternative approach commonly used in business valuation is the multiples-based valuation. Because multiples are derived from comparable market values, it serves as an indirect, market-driven approach to valuation (Schreiner, 2007). It can function... (22)
2.5.1.2. Valuation Process Using Multiples (22)
Usually, a four-step process is followed for valuation through multiples. The first step involves selecting appropriate value measures, such as the value driver and market price variable. Usually, equity value multiples, like P/E, P/B, P/S, and P/OCF,... (22)
In the final step, the firm´s equity value is determined by comparing it to its peers. The value of a firm can be calculated using equity value multiples, with “xi,t” representing the corresponding financial metric (Schreiner, 2007): (23)
When it comes to determining the entity value multiples for a company, the net debt of the company is subtracted from its value (Schreiner, 2007): (23)
As a result of this approach, valuation is based on an accurate reflection of the firm´s financial standing, so that it can provide comparative data with industry peers that is meaningful. (24)
2.5.1.3. Most widely used valuation multiples (24)
After defining the valuation process using multiples, the most used equity and entity multiples will be discussed in more detail. Many valuation multiples are selected based on professional judgment, with analysts often relying on widely recognized an... (24)
The initial focus will lie on multiples based on capitalization, i.e., equity multiples, having the advantage of being easily understood and calculated (Fernández 2002). These multiples express the market value of a company´s shareholders in relation ... (24)
Although the P/E multiple is widely used in valuation, it has three key limitations that should be addressed. Firstly, it becomes meaningless when a firm achieves a low or negative net income. Secondly, it needs to be mentioned that different accounti... (25)
Another widely applied equity multiple worth mentioning is the Price to Book Value (P/BV), which measures a company´s market capitalization relative to book value, or price per share versus book value (Suozzo et al., 2001): (25)
It is especially useful for valuing companies in capital-intensive industries where tangible assets are the primary source of value. Financial institutions use it extensively to value their assets because they generate profits through leveraging. Yet ... (25)
The focus is now shifted to the importance of key enterprise multiples, i.e. entity multiples, as well as the valuation implications they bring with them. Rather than relying solely on market capitalization, these multiples consider the firm´s market ... (25)
The so-called Enterprise Value to Sales (EV/Sales) compares a firm´s enterprise value with its sales, which makes it useful for evaluating early-stage businesses, where earnings tend to be negative. (26)
Due to accounting policies, sales-based multiples are a more accurate measure of a company´s performance than earnings-based multiples. There are, however, limitations to EV/S multiples, as they scale valuation solely based on revenue without consider... (26)
Subsequently, EV/EBITDA and EV/EBIT multiples are discussed in more detail, which are prevalent in investment banking since they are less impacted by capital structure and tax differences. Additionally, EBITDA serves as an approximation of cash flow, ... (26)
2.5.1.4. Strengths and Weaknesses of the Earnings Multiples Approach (26)
Overall, multiples simplify the process of valuing companies by combining key assumptions from a full DCF model into a single metric. Their main advantage lies in efficiency since investors and analysts benefit from easily available multiples, allowin... (26)
2.6. Dynamics of Start-up Valuation (27)
Having established a general understanding of the most common traditional valuation methods in business valuation, namely the income-based and market-based approaches, the focus now shifts to how these conventional methods must be adapted for valuing ... (27)
2.6.1. Defining a Start-up (27)
Despite its widespread use in both popular culture and academic literature, there is no universally accepted definition of a start-up. However, a widely recognized definition offered by Blank and Dorf (2012) describes start-ups as temporary organizati... (27)
Despite only making up a small fraction of the economy, new ventures have a disproportionately large impact. In the last few years, small businesses have generated around two-thirds of new jobs, making them a key contributor to job creation. Additiona... (27)
Despite their diversity, young companies share several characteristics that make their valuation challenging. In many cases, there is little to no operating history or financial data available beyond a few months or years. Many early-stage companies h... (28)
2.6.2. Startup Valuation: Market Dynamics & Risk Factors (28)
Another important factor to consider in startup valuation is the dynamic nature of the markets in which they operate. The assumption of an efficient capital market is central to traditional valuation approaches. Public markets are likely to reflect th... (28)
Equally critical to consider are risk factors, which significantly impact startups’ overall value. As an example, for technology-driven ventures, strategic partnerships with established corporations and investors, or even patent ownership, are key ind... (29)
2.7. Valuation Challenges of Startups Using Traditional Methods (29)
As previously mentioned, young companies are hard to value since they lack track records, rely heavily on private equity, and are highly vulnerable to failure. The following section outlines key estimation challenges encountered when applying discount... (29)
2.7.1. Limitations of Intrinsic DCF Approach (29)
Intrinsic valuation relies on four key components. The first component assesses the projected cash flows generated by the existing assets of the company. As a second step, it considers growth potential that can be achieved through future investment an... (29)
Firstly, the typical methods of valuing a company´s existing assets considering startup characteristics are examined. To estimate the cash flow generated by these assets, traditional methods require analyzing the firm´s financial statements and histor... (30)
A major issue with valuing new ventures, and the focus of this thesis, is that their value is largely determined by their future growth rather than their current performance. Therefore, it is crucial to evaluate their growth assets. In many cases, due... (30)
This thesis also makes a significant point regarding the unique risk profile of startups. Due to their reliance on industry benchmarks and historical performance, typical valuation models like CAPM to calculate the discount rate are not suitable for s... (31)
Lastly, the terminal value represents a crucial component of startup valuation using the DCF approach. An estimated ninety percent of the company´s value is derived from it. In the case of startups, it is especially difficult to determine the TV, as i... (31)
In conclusion, it can be said that regardless of the reasons for valuing a company, its value is fundamentally determined by its expected future returns, typically in cash distribution because of eventual sales proceeds. This principle also applies to... (31)