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La valutazione d'azienda nelle operazioni di Leveraged Buy-Out
No full textThe Leveraged Buy-Out (LBO) is a mean to favourite the transfer of control of a business in many situations: from a typical firm acquisition to a business proprietorship transfer between family members, supported or not by a financial operator (like a private equity firm). In this article the main financial techniques that can be utilized in a LBO valuation are analyzed, introducing the critical distinction between the required and the expected return on debt, taking into account the recent evolution of the option pricing theories applied to debt valuation. Using a practical exemplification, it is showed the ways to apply a DCF valuation in its main versions. The typical DCF/APV application, proposed by literature for LBO valuation, is consistent only with a pure CAPM environment where the cost of default for debt is none and consequently there is no distinction between the required and the expected return on debt. If you want to realize a sort of hybrid valuation, using the required (nominal) cost for debt and adjusted the cost of equity only for the systematic component of the risk of debt, the APV is not easily reconciled with the other DCF applications (DCF/WACC and DCF/FCFE), implied some caution in an exclusive utilization of the APV methodology in a LBO valuation
Distressed Firm Valuation: A Scenario Discounted Cash Flow Approach
Full text linkValuation of a distressed company is a very tricky issue, for which many approaches and methods have been provided by the literature. Unfortunately, many of the more suitable proposals from a theoretical point of view (i.e., those based on option pricing theory, and even integrated with game theory) are very difficult to apply to real cases. To face the many contingencies emerging in a real case valuation, a scenario discounted cash flow (SDCF) model is provided here. The focus is on companies at an advanced stage of distress, where their ability to operate as a going concern is in question, and maintenance or recovery of business continuity requires significant interventions in the firm's strategic, operational, and financial structure. In this context, SDCF, with a number of arrangements elaborated here, appears useful for valuing assets, debt, and equity - from current or potential new investors - and the interactions between them, which are particularly critical for distressed companies. At the same time, SDCF takes into account the firm's liquidation option, not only at the valuation date but even after a restructuring plan has been launched. The going-concern value including the liquidation option should be the reference point for judging the suitability of business continuity compared to liquidation. In presenting the model, the key concepts and methodology adopted are set out following a numerical example inspired by a real case
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