Chapter_10

Chapter_10 - Analyzing Privately Held Companies Course...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Analyzing Privately Held Companies
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Course Layout: M&A & Other Restructuring Activities Part IV: Deal Structuring & Financing Part II: M&A Process Part I: M&A Environment Payment & Legal Considerations Public Company Valuation Financial Modeling Techniques Business & Acquisition Plans Search through Closing Activities Part V: Alternative Strategies Accounting & Tax Considerations Business Alliances Divestitures, Spin-Offs & Carve-Outs Bankruptcy & Liquidation Regulatory Considerations Motivations for Part III: M&A Valuation & Modeling Takeover Tactics and Defenses Financing Strategies Private Company Valuation Cross-Border Transactions
Background image of page 2
Learning Objectives Primary learning objective: Provide students with a knowledge of how to analyze and value privately held firms Secondary learning objectives: Provide students with a knowledge of Characteristics of privately held businesses Challenges of valuing and analyzing privately held firms; Why and how private company financial statements may have to be recast; and How to adjust maximum offer prices for liquidity risk, the value of control, and minority risk
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What is a Private Firm? A firm whose securities are not registered with state or federal authorities Without registration, their shares cannot be traded in the public securities markets. Share ownership usually heavily concentrated (i.e., firms “closely held”)
Background image of page 4
Key Characteristics of Privately Held U.S. Firms There are more than 28 million firms in the U.S. Of these, 7.4 million have employees, with the rest largely self-employed, unincorporated businesses M&A market in U.S concentrated among smaller, family-owned firms -- Firms with 99 or fewer employees account for 98% of all firms with employees
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Percent Distribution of U.S. Firms Filing Income Taxes in 2004 Proprietorships Partnerships Corporations 72% 9% 19%
Background image of page 6
Family-Owned Firms 89% of U.S. businesses family owned Major challenges include: succession, lack of corporate governance, informal management structure, less skilled lower level management, and a preference for ownership over growth.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Governance Issues What works for public firms may not for private companies “Market model” relies on dispersed ownership “Control model” more applicable where ownership tends to be concentrated and the right to control the business is not fully separate from ownership (e.g., small businesses)
Background image of page 8
Challenges of Analyzing and Valuing Privately Held Firms Lack of externally generated information Lack of adequate documentation of key intangible assets such as software, chemical formulae, recipes, etc.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/28/2011 for the course FIN 315 taught by Professor Welker during the Spring '09 term at IUP.

Page1 / 26

Chapter_10 - Analyzing Privately Held Companies Course...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online