1,721,706 research outputs found
Valuing a Leveraged Buyout: Expansion of the Adjusted Present Value by means of Real Options Analysis
No full textA major flaw in using the adjusted present value (APV) method to value the target firm of a leveraged buyout is that it results in systematic undervaluation of the firm in question. The author proposes to remedy the problem by employing real options analysis to expand the target firm's APV on its equity side. Two real options may be identified as being inherent in the leveraged buyout structuring process: a financial default call option and an operating default call option, both of American type. The resulting expanded equity value allows for the flexible management of firm value uncertainty while continuing to incorporate the extra value creation deriving from the exploitation of the tax shield
I project bonds: una nuova forma di capitale di debito nella finanza di progetto
No full textL’articolo tratta dei project bonds (PB) quale forma innovativa di capitale di debito per il finanziamento degli investimenti in infrastrutture, muovendo da una rassegna della letteratura italiana su dette tipologie di obbligazioni e da un esame degli elementi distintivi ad esse assegnati dalla disciplina del 2012-2014. E’ poi condotta un’analisi comparativa (di tipo empirico) tra le emissioni di PB realizzate nel mercato domestico e quelle condotte nei mercati internazionali nel periodo 2000-2016, avendo riguardo a numerosità, volumi e caratteristiche (es. settoriali). Viene inoltre descritto il meccanismo di miglioramento del merito di credito degli emittenti disegnato dalla EIB con lo scopo di favorire gli impieghi di capitale istituzionale per il finanziamento degli investimenti infrastrutturali nell’Unione Europea. Il lavoro si conclude fornendo indicazioni al policymaker per rimuovere le criticità che hanno finora ritardato il pieno sviluppo del mercato italiano dei PB
Bank lending to energy services companies: a real options valuation of third-party financing
No full textThe business model of the Energy Services Company can
leverage on a larger scale diffusion of Distributed
Generation as an alternative approach to supplying and
managing energy resources (electricity and heat) versus
the traditional centralized power framework. Market
uncertainty of the start-up phase and managerial
flexibility embedded in the Distributed Generation
business may justify the integrated use of Real Options
Analysis in firm valuation. Particularly, the decision
about the legal contracting strategy and the technology
can be treated as a real option problem so as to improve
the valuation process. Additionally, the White Certificates
mechanism may increase the financial attractiveness of
energy efficiency projects as both a further opportunity
for the ESCo’s management to strengthen the business
plan and a key guaranty mechanism for banks willing to
lend money
Switch, Switch, Switch! A Regime-Switching Option-Based Model for Valuing a Tolling Agreement
No full textThis article proposes a real options valuation of a tolling contract using a combined switching option and volatility regime switching model. In a tolling-based transaction, the toller becomes the energy manager (but not the owner) of the power plant, having the option to switch it on or off to benefit from (mitigate) the upside (downside) potential related to frequent, jumpy fluctuations of power (and gas) prices. Value creation from such flexibility in managing the spark spread risk may be better captured by expanding the static NPV of the plant via exercise of a switching (compound) option having the plant itself as an underlying two-market-based asset portfolio (electricity and gas). Results from adoption of a pentanomial lattice pricing approach show that the set of tolling fees the toller would prefer to pay to the tollee “in equilibrium” is a decreasing function in the portfolio volatility because of the higher risk being borne by the former. Though the toller is willing to fairly pay equal or less than the value created from active management of the power plant, obtaining a positive net profit, the tollee may rely on a constant flow of bullet bond-like installments, securing remuneration of equity capital invested and arrangement of a project financing for plant construction
Valuing a Greenfield Real Estate Property Development Project: A Real Options Approach
No full textPurpose
Real options available to developers and leading to an active and dynamic development of real estate assets are numerous. The purpose of the article is twofold. First, a conceptual framework is proposed as a practical aid for recognizing and understanding some frequently recurring combinations of options (such as deferral and expansion options). Based on the definition and classification of real options available in real estate markets, a comprehensive valuation tool for quantifying the value of those options embedded in a real estate development project is thus developed using a portfolio view.
Design/methodology/approach
Based on standard option pricing techniques, the proposed conceptual methodology is validated by applying it to an actual case of an investment for the construction of a new, multi‐purpose building in the semi‐central zone of the urban area of Rome (Italy).
Findings
Based on a static land value of €34.7 million, a waiting mode (deferral option) at an early stage of developing a property accounts for 16 percent of the expanded land value of the project, with 8 percent of such value being contributed by the expansion option. A real options valuation of the options portfolio available to a real estate developer enables increasing the project value by 31.1 percent as opposed to a traditional DCF analysis. In line with financial options theory, values of real options increase as volatility rises.
Practical implications
The case‐based analysis highlights that: flexibility in real estate development may create additional value enabling real estate developers or funds to react to market trends as new information arrives and uncertainty on fundamental factors (e.g. property prices) unfolds; the extra value added by managerial flexibility is neglected by DCF/NPV techniques; contrary to the common criticism on its lack of rigor, option valuation theory is suitable for appraising real estate assets; a portfolio approach is crucial when multiple real options exist.
Originality/value
Active management of real estate investments in response to changing property market and technology conditions confers operating flexibility and strategic value to appraisal of development projects beyond what is traditionally captured by a DCF model. An options approach to valuing and managing real estate development may change the developer's perspective altogether. Based on the combination of an original classification and a portfolio view of options existing in real estate markets, a real options framework for assessing the value of strategic flexibility incorporated in a greenfield development project (also accounting for potential option interactions) is designed
Il posizionamento strategico dei fondi infrastrutturali mediante la costruzione di frontiere rischio-rendimento: un'analisi empirica
No full textThis study aims to apply portfolio theory to the emerging industry of infrastructure funds by proposing a methodology for the strategic positioning of an infrastructure fund based on the construction of “empirical” risk-return frontiers. Such an approach, illustrated herein applying it to equity and debt funds operating in Europe and North America, empirically complements those theoretical categorizations conventionally displaying the distinct risk-return profiles of infrastructure investments as a result of the related project development stage. The proposed method can be utilized to carry out portfolio optimization, trend monitoring and/or comparative (backward/forward-looking) studies in the infrastructure funds’ sector, a growing industry in Europe with interesting prospects (yet to nurture) in Italy to the extent that it may contribute to the expansion of the financing market for those privately sponsoring the realization of works of public utility via use of project finance techniques
The value relevance of a newly adopted accounting standard: the case of business divestitures under IFRS 5 versus SFAS 144
No full textIl finanziamento degli investimenti in infrastrutture in Italia: evidenze empiriche ed implicazioni di policy
No full textSulla base di un campione di transazioni di project financing concluse in Italia nel periodo 2000-2016 – mediante l’applicazione dello schema contrattuale del Partenariato Pubblico-Privato (PPP), nei settori dei trasporti, energia e telecomunicazioni – l’articolo si prefigge di condurre un’analisi empirica delle scelte di struttura finanziaria operate dagli sponsors nel mercato domestico degli investimenti in infrastrutture, nella loro interazione con le banche finanziatrici ed i soggetti pubblici concedenti. Le evidenze esaminate – concernenti l’evoluzione del ricorso al mix delle fonti tradizionali (debito bancario, equity), le innovazioni negli strumenti utilizzati (project bonds), e gli investitori emergenti (infrastructure funds) – sono poi declinate in alcuni spunti di riflessione (policy recommendations) che, se attuati dai policymakers
del nostro Paese, possono contribuire a colmare il gap infrastrutturale italiano mediante il rilancio ed il rinnovo delle tecniche di finanziamento degli investimenti ormai ritenuti improrogabili
State-Owned Private Equity Funds Investing in “National Champions”: The Case of Italy
No full textDespite the recent upsurge of scientific work on the Sovereign Wealth Funds’(SWFs) phenomenon, little is known on the role played in a country’s economy by a subcategory of SWFs: Strategic Funds (“SFs”). As an explicit form of governmental intervention in the economic system associated with a new model of State capitalism, SFs acquire strategic (equity) stakes in enterprises of national interest with the purpose of enhancing the home country’s growth and competitiveness. The aim of this article is to investigate the rationale, public policy objectives and investment strategies pursued by SFs, thus contributing to the SWF literature in three ways. First, we provide a definition of State-Owned Private Equity (SOPE) as referred to the activity of SFs and develop a conceptual framework to strategically position them within the PE industry. Second, we conduct a peer analysis of SFs operated by European national governments on the basis of which we propose a taxonomy of such PE entities classified into competitive and defensive ones. Third, we discuss how a SF can contribute to enhancing the competitiveness of the home country through amelioration of its macroeconomic fundamentals (e.g., value added, employment) associated with the adequate management of portfolio companies. To do so, we illustrate the case study of the SF operated by the Italian government, named as Fondo Strategico Italiano (FSI)
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