The valuation of businesses is since decades a theme, which is still up to date and growing. The reason for the high interest regarding the theme is quite simple: If an enterprise is valued, there is a high amount of money involved. Business values are daily business, at the same time they have a high amount of complexity and issues, the raters are confronted with. The reason for a business value could be different, starting with management successions and ending with the buy out of an enterprise.
The value of an enterprise is subjective and contents conflicts of interests. On one hand there is the current owner. For him the enterprise has an added value because of the personal background. On the other hand, there is the further buyer of the company, who wants to pay a lower price for the company to minimize the liabilities. Because of this the value of a business depends on the target and the reason of the valuation, reflecting the motto “The Price is what you pay. Value is what you get.”
The value of the business can be calculated by different ways. In the last years, the amount of valuation methods increased. Currently there are many valuations available, which end in different results. But how is the value of an enterprise defined and calculated? Why is the value of a business needed? And what are the differences between the methods? These questions will be answered in the present assignment. The Objective is to show with the help of the concrete example Daimler AG the process of a business valuation including the calculation of the value of the enterprise.
To achieve this objective, the methodology of the present assignment is described in the following chapter first, before the theory of business valuations will be explained. The reasons for a valuation are described and the methods with a focus on Discounted cash flow methods (DCF) and multiples methods are stated. After presenting the company Daimler the methods are applied of Daimler in the fourth chapter, the business value will be calculated with the different methods. The results will be discussed in chapter five, before finally a conclusion and outlook will be given.
Table of Contents
1. Introduction
1.1 Problem and Objective
1.2 Scope of Work
2. Methodology
3. Theoretical background
3.1 Business Valuation
3.1.1 Valuation methodologies
3.1.1.1 Discounted Cash flow methods
3.1.1.1.1 Entity methods
3..1.1.2 Equity methods
3..1.1.3 Advantages and disadvantages DCF methods
3..1.2 Multiples method
3.2 Presentation Daimler AG
4. Valuation of the Company Daimler AG
4.1 Discounted Cash flow method
4.1.1 Entity method
4.1.2 Equity method
4.2 Multiples method
4.3 Summary of the results
5. Discussion
6. Conclusion and outlook
Objective and Research Focus
The primary objective of this assignment is to conduct a professional business valuation of the enterprise Daimler AG. The research seeks to explore and apply various valuation methodologies, specifically Discounted Cash Flow (DCF) models and multiples-based approaches, to determine the enterprise's value and evaluate the practical applicability and limitations of these financial tools in a real-world corporate setting.
- Application of DCF methods including entity and equity approaches.
- Use of multiples valuation techniques with a peer group comparison.
- Analysis of financial performance indicators such as EBIT and Free Cash Flow.
- Evaluation of the impact of future growth assumptions and terminal value.
Excerpt from the Book
3.1.1.1 Discounted Cash flow methods
DCF methods depend on the future as they are forward-looking methods. The value of the enterprise is identified by using the cash flows of an enterprise. Cash flows are the net inflows of liquidity during a defined business period. The idea behind this methods are, that the true value of a business is based on the free cash flows over years plus a terminal value, focusing on cash and not on profits. The DCF methods show, how much cash an investor received for his invested money. It implements the factors risk and future. For the factor future different assumptions relating to the future have to be made. The DCF methods are divided in methods of gross and net accounting methods shown in Fig. 2.
The two methods and their differences are described in the following.
Summary of Chapters
1. Introduction: Outlines the significance of business valuation, defines the problem statement, and establishes the scope of the work.
2. Methodology: Details the literature-based approach, utilizing professional databases and academic resources to gather information.
3. Theoretical background: Explains fundamental concepts of business valuation, focusing on DCF methods, the CAPM model, and multiples-based benchmarking.
4. Valuation of the Company Daimler AG: Applies the theoretical frameworks to real financial data of Daimler AG, calculating values through various models.
5. Discussion: Compares the results derived from different valuation models and reflects on the influence of assumptions and market conditions.
6. Conclusion and outlook: Summarizes the findings and provides an assessment of the current valuation status of Daimler AG.
Keywords
Business valuation, Daimler AG, Discounted Cash Flow, DCF, Multiples method, EBIT, EBITDA, Equity method, Entity method, CAPM, WACC, P/E ratio, CAPE ratio, Free Cash Flow, Financial analysis
Frequently Asked Questions
What is the core focus of this academic assignment?
The assignment focuses on determining the business value of Daimler AG by applying established financial valuation methodologies such as DCF and multiples valuation.
Which primary valuation methods are examined in this work?
The work examines Discounted Cash Flow (DCF) methods, including entity and equity approaches, as well as multiples-based valuation methods using a peer group.
What is the main objective of the valuation process described?
The primary goal is to demonstrate the process of business valuation using Daimler AG as a concrete example, highlighting how different methods yield varying results.
Which research methodology was employed to gather the necessary information?
The author conducted a detailed literature search, utilizing professional databases like Springerlink and Wiso, as well as academic search engines like Google Scholar.
What topics are covered in the main section of the assignment?
The main section covers the theoretical foundations of business valuation, the presentation of Daimler AG, the practical application of valuation models, and a critical discussion of the results.
Which specific keywords define the scope of this study?
The study is characterized by keywords such as business valuation, Daimler AG, DCF, multiples method, CAPM, and various financial performance ratios.
How does the terminal value influence the outcome of the DCF valuation?
The terminal value plays a significant role, as approximately 60% of the final enterprise value in the DCF model is derived from it, making the growth rate assumptions highly impactful.
Why are multiples-based methods sometimes considered less accurate for future forecasting?
Multiples reflect the status quo based on past or current data and do not explicitly model future growth trajectories, unlike forward-looking DCF models.
What role does the peer group play in the multiples valuation?
The peer group, consisting of companies like BMW and Volkswagen, provides a benchmark to assess Daimler's market performance and derive valuation ratios based on the law of one price.
What is the significance of the CAPE ratio mentioned in the study?
The Cyclically Adjusted Price-Earnings (CAPE) ratio helps minimize the impact of earnings variations by using a ten-year average, offering a more realistic valuation perspective than standard P/E ratios.
- Arbeit zitieren
- Christin Wessels (Autor:in), 2016, Business valuation of the enterprise Daimler AG, München, GRIN Verlag, https://www.hausarbeiten.de/document/442181
