By Svend Reuse, Prof. Dr. Eric Frère und Prof. Dr. Burghard Hermeier
Specially small cooperative banks and discounts banks are faced with adversarial takeovers, loss of good fortune within the retail marketplace, an unfavourable fee source of revenue ratio, and the ensuing demanding situations. Angainst this historical past, company assessment is of accelerating significance for German banks. Svend Reuse's research of the theoretical established order of company evaluate within the German banking region exhibits that simply the profits price procedure, the fairness method and the multiplier technique are invaluable during this context.
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However, the quality of the evaluation method depends on the comparison with the reference companies391. They have to be carefully chosen by market share, market position, capitalization, company’s structure, and much more392. Another critical factor is the data availability, which can be considered as given for listed companies. Nevertheless, for German companies, the data basis is much smaller than for companies in the USA due to the number of stock quotations393. However, the multiplier methods require an information efficiency of the capital market394.
Schierenbeck (1998), p. 390. Cf. Kuhner/Maltry (2006), p. 196. Useful for the earnings value approach, cf. 1. 2 Theoretical Status Quo of Corporate Evaluation 22 Component – – + Used for Annual surplus + Earnings from shares Extraordinary income – Non earning-relevant taxes Cash inflow of normal operating Cash outflow of normal operating incl. taxes = Operative/sustainable earning after taxes + Depreciation225 + Interest payments + Earning relevant taxes = EBITDA226 – Taxes at fictitious self financing + Changing of accruals = gross cash flow / operating cash flow – Extension investments + Disinvestments –/+ Changing of working capital = Free cash flow (FCF) + Tax shield = Total cash flow (TCF) – Interest payments227 – Redemption payments + New loans – Other claims = Flow to equity (FTE) Table 6: Differentiation of cash flows Earnings value approach WACC FCF & APV WACC TCF Equity Approach 228 These cash flows are used in several models.
Copeland/Koller/Murrin (2002), pp. 466. Cf. Amely/Suciu-Sibianu (2001), p. 92. Cf. Copeland/Koller/Murrin (2002), p. 466. 2 Methods of General Corporate Evaluation 31 ion the value of the company will be too low, if real options are not implemented326. On the other hand, this has to be seen critical. Kuhner/Maltry stated that only in case of exclusiveness the option has an inherent value327. Quantifying the value of this option would overestimate the company’s value328. 329 Getting reliable results requires data of high quantity and quality.