ent_11 - MNG00314 Entrepreneurship Topic 11: Buying Business

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
MNG00314 Entrepreneurship Topic 11: Buying Business
Background image of page 1

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

View Full DocumentRight Arrow Icon
Chapter Objectives 1. To explain the importance of valuation 2. To describe the basic elements of due diligence 3. To examine the underlying issues involved in the acquisition  process 4. To outline the various aspects of analyzing a business 5. To present the major points to consider when establishing a  firm’s value 6. To highlight the available methods of valuing a venture 7. To examine the three principal methods currently used in  business valuations 8. To consider additional factors affecting a venture’s valuation
Background image of page 2
The Importance of Business Valuation Business valuation is essential when: Buying or selling a business, division, or major asset Establishing an employee stock option plan (ESOP) or profit- sharing plan for employees Raising growth capital through stock warrants or convertible loans Determining inheritance tax liability (potential estate tax liability) Giving a gift of stock to family members Structuring a buy/sell agreement with stockholders Attempting to buy out a partner Going public with the company or privately placing the stock
Background image of page 3

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

View Full DocumentRight Arrow Icon
Underlying Issues When Acquiring a Venture Reasons for the Acquisition Differing Goals of Buyer and Seller Emotional Bias of the Seller Valuation of the Venture
Background image of page 4
Reasons for an Acquisition To gain access to new products or expand the existing product line To increase the number of customers and market share To integrate vertically, backward or forward to improve supply and distribution channels and to reduce inventory levels To develop or improve customer service functions To reduce indirect and direct operating costs and fixed costs by using excess production and service capacities and by eliminating duplicated operations
Background image of page 5

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

View Full DocumentRight Arrow Icon
Evaluation of an Acquisition A firm s potential to pay for itself during a reasonable period of time The difficulties that the new owners will face during the transition period The amount of security or risk involved in the transaction; changes in interest rates The effect on the firm s value if a turnaround is required The number of potential buyers Current managers intentions to remain with the firm The taxes associated with the purchase or sale of the enterprise
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This document was uploaded on 03/26/2011.

Page1 / 19

ent_11 - MNG00314 Entrepreneurship Topic 11: Buying Business

This preview shows document pages 1 - 7. Sign up to view the full document.

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