VALUATION CONCEPTS AND METHODOLOGIES CHAPTER 7
OTHER CONCEPTS AND
VALUATION TECHNIQUES
LEARNING OBJECTIVES
1. Understand Due Diligence
2. Explain its importance in mergers, acquisitions, and divestitures.
3. Identify key focus areas, such as financial, legal, and operational reviews.
4. Apply techniques like DCF, comparable company analysis, and synergy evaluation.
5. Understand how valuation impacts deal strategies and outcomes.
6. Analyze Divestiture Strategies
7. Discuss divestiture processes and their role in corporate strategy.
8. Utilize asset-based and spin-off valuation methods.
9. Explore Specialized Valuation Techniques
10. Understand methods for valuing distressed and intangible assets.
11. Identify when to apply liquidation, replacement cost, or adjusted net asset value.
12. Evaluate Ethical and Strategic Aspects
13. Recognize ethical considerations and regulatory compliance in valuations.
14. Assess valuation's role in shaping strategic decisions.
15. Apply Concepts to Real Scenarios
16. Solve case studies on M&A and divestitures to refine practical skills.
Part I. Definition of Terms
Define the following terms in 2–3 sentences each:
1. Due Diligence
2. Discounted Cash Flow (DCF)
3. Synergy in M&A
4. Divestiture
5. Comparable Company Analysis
Part II. Read the statements below and write True or False. If false, provide a brief explanation.
1. Due diligence is only concerned with financial factors.
2. The DCF method considers the time value of money in valuation.
3. Synergies in M&A always result in increased company valuation.
4. Asset-based valuation is the most suitable technique for valuing intangible assets.
5. Ethical concerns in valuations are irrelevant if the outcomes are accurate.
Part IV. Answer activity in the book, pages 195 to 206.
Prepared by: EDTejo 1
VALUATION CONCEPTS AND METHODOLOGIES CHAPTER 7
Part V. Case Analysis.
1. A corporation is planning to sell its non-core division, Precision Parts Inc., which has the following
assets and liabilities:
Item Amount ($M)
Fixed Assets 50
Current Assets 20
Intangible Assets 15
Total Liabilities 25
Questions:
a. Calculate the adjusted net asset value of Precision Parts Inc.
b. If the division is sold at a 10% premium over its net asset value, determine the final selling price.
2. Global Tech Ltd. is acquiring InnoSoft Inc. and expects annual cost savings of $3 million and
additional revenue of $2 million due to the merger. The discount rate for these synergies is 8%, and
the expected synergy benefits will last for 5 years.
Questions:
a. Calculate the present value of the cost savings and additional revenue separately.
b. Determine the total value of synergies from the merger.
Prepared by: EDTejo 2
