MODERN FINANCE, MANAGEMENT INNOVATION& ECONOMIC GROWTH SET Coordinated by Faten Ben Bouheni

Financial operations depend on potential value creation, the nature of the shareholder base, the level of development of the company and its growth prospects. They result from different commercial and financial strategies that must integrate the interest of the capital holders, the influence and strategy of the group in the initiative and the structure of the offer.

This book examines how, in practice, a companys capital is structured, taking into account the interests of various stakeholders. The performance of valuation methods, which serve investors in their decision-making and financial arrangements, is developed in detail. Depending on the contexts present in the control market, the methods of stock market and transactional comparables, discounted cash flows and the patrimonial approach, will be favored to assess the value of a companys shares. Performance of Valuation Methods in Financial Transactions is an in-depth analysis of equity transactions and is aimed at students and corporate finance professionals.

Introduction vii

Chapter 1. Traditional Valuation Methods and Ways of Applying Them 1

1.1. Introduction 1

1.2. The cost of financial structure 3

1.2.1. Financial asset valuation 4

1.2.2. Optimal capital structure 10

1.2.3. Theories of organizations 19

1.3. Valuation measures and follow-up measures 23

1.3.1. Evaluation by comparative approach 24

1.3.2. Flow assessment 34

1.3.3. Valuation through propriety and mixed approaches 44

1.4. The perspectives of assessment: control operations 50

1.4.1. The shareholder 51

1.4.2. Control negotiations 59

1.4.3. Leveraged buyout operations 76

1.5. Conclusion 87

Chapter 2. The Performance of the Assessment and the Creation of Value from Control Operations 89

2.1. Introduction 89

2.2. Theoretical adjustments 90

2.2.1. Reconciliation of the traditional view with the ModiglianiMiller theorem 91

2.2.2. Optimizing the valuation methods 109

2.3. Contextual impacts and adjustments 131

2.3.1. Leverage transactions 132

2.3.2. Stock market multiples: from the impact of structures to anticipating profitability 136

2.3.3. Two delicate contexts for valuation: the bankruptcy situation and the start-up company 149

2.4. The creation of value resulting from control operations 158

2.4.1. The creation of value from the buyout of companies in bankruptcy 158

2.4.2. Abnormal returns resulting from control operations 159

2.4.3. The motivation of buyers to initiate control operations 161

2.5. Conclusion 163

Conclusion 165

Appendix. Demonstrating the Terminal Value (TV) of DCFs 169

References 171

Index 179