【正文】 CONFIDENTIALValuation for ”dummies” A beginners’ guide to valuation in an Mamp。A situationPeter Bonn233。n – CPJohn Hansen – CPJ248。rgen Rugholm – CPKasper Vaala – CPApril, 2022This report contains information that is confidential and proprietary to McKinsey amp。 Company and is solely for the use of McKinsey amp。 Company personnel. No part of it may be used, circulated, quoted, or reproduced for distribution outside McKinsey amp。 Company. If you are not the intended recipient of this report, you are hereby notified that the use, circulation, quoting, or reproducing of this report is strictly prohibited and may be unlawful.CONTENTSIntroduction to valuationDCF valuationMultiples valuation2CONTENTSDCF valuationMultiples valuation? The purpose of valuation is to estimate the present value of a pany ? The result of the valuation yields the accumulated value of the equity and the debt, in total called the aggregate value? The basis for valuation is historical and future financial parametersIntroduction to valuation3OUR BELIEFS ABOUT VALUATION? Valuation is not an exact science? There is no single value of a pany, rather a range of potential values? Valuation should be carried out using more than one method, if at all possible? Each of the conventional methods (DCF, trading multiples, precedent transaction multiples, etc.) have inherent risks of biases? Technical parameters (WACC and terminal growth rate) have great impact on value and it is paramount to allocate enough time on these? Use of multiple valuation methods opens up the negotiation space? It is critical to fully understand the implications of various methods to focus the negotiations in the preferred direction? Actual value agreed upon in a transaction usually differs from perceived value? In many situations there may be a CFamp。S specialist on the team but it is still important for the whole team to have a basic understanding of valuation methodologies 4THE VALUE OF A COMPANY CONSISTS OF TWO PARTS*Aggregate value is sometimes called Enterprise Value (EV), which in turn is sometimes confused with Equity value. To avoid confusion, when referring to the total value of an entity, the investment banking notation of Aggregate Value (AV) is used throughout this presentation**In principle, market value of Net debt should be used. This, however, is rarely available and, as an approximation, the latest balance sheet figures are used insteadValue belonging to shareholdersValue belonging to debt holdersAggregate value (AV)*Net debt**Equity value? In mergers, ownership shares are based on equityvalue? A DCF valuation yields the aggregate value? If a pany is listed, market capitalization equals the equity value? Equity value is the bined value of the shares? Be careful not to confuse book value of equity with Equity value= Short term interestbearing debt+ Long term interestbearing debt+ Minorities interest+ Preferred stock+ Capitalized leases Cash and cash equivalents 5THE CALCULATION OF AGGREGATE VALUE IS BASED ON A NUMBER OF KEY PARAMETERS Parameter Definition How/where to find it?Sales Ine received in exchange for goods and servicesIne statement (Pamp。L)EBITDA Earnings before interest and taxes, depreciation and amortizationEBIT + depreciation and amortizationEBIT Earnings before interest and taxes Ine statementDepreciation Amortization of fixed assets to allocate cost over their depreciable lifeIne statement or cash flow statementAmortization Amortization of intangibles assets to allocate cost over their depreciable lifeIne statement or cash flow statementCapital expenditure (CAPEX) Outlay of money to acquire or improve capital assets such as buildings and machineryCash flow statement or notes to balance sheetWorking capital Current assets (. accounts receivables, inventories, other current assets) minus current liabilities (. trade creditors, other current liabilities)Balance sheet or notes to balance sheetBeta A measure of the pany’s volatility pared to the market portfolio (systematic risk)Needs to be calculated. Described in more detail later in this documentLeverage Gearing of the pany. Net debt divided by market valueNet debt can be calculated from latest balance sheet. Example of leverageratio calculation will followWACC (Weighted Average Cost of Capital)Rate at which free cash flows are discounted back to valuation dateNeeds to be calculated. Examples will followFree Cash Flow (FCF) After tax cash flow generated by the pany that is available to debt holders and shareholdersNeeds to be calculated. Example will follow6EBIT IS A FUNDAMENTAL PARAMETER WHEN CALCULATING THE VALUE OF A COMPANYAggregate value (AV)Net debtEquity valueDebt holdersShareholdersGovernmentInterestTaxNet ineSharesSharesSharesEarnings before interest and taxes (EBIT)EBIT is an earnings flow available to all capital providers7VALUATION METHODOLOGIESMethodology Market’s rationale5–10 year DCF model ? Fundamental analysis of target’s economics and growth/ profitability prospects? Adherence to the theoretical principle that the value of a business depends on its future generation of aftertax cash flows.? Equity research analysts invest time in building “fundamental” economic models of the panies they cover to link (to the extent possible) value to operations and to required capital expenditure for likeforlike growthDCF (Discounted Cash Flow)Precedent transactions ? Average/median of multiples paid in (recent) transactions of parable size and nature, .:– AV*/Sales– AV*/EBITDA– AV*/EBIT? The assu