The European energy power markets continue to be one of the major topics of political, industrial and financial discussions and meetings. Prices of the energy products are increasing due to declining reserves and the emerging countries like China and India are fueling a constant growth in world-wide demand. The right energy mix for the utility companies is becoming more and more important as well as the investments in a ‘cleaner’ energy due to ecological issues are necessary. For a utility company a powerful standing is essential to secure these supply issues for short and longterm supply. This is maybe one reason for the upcoming consolidation in the energy market. E.ON is also trying to play this game. Its strategic and financial goals through the merger with Endesa are to create the world’s leading power and gas company and therefore, a stronger presence in the European and American market as well as to create an advanced financial value for the shareholders. Generally for mergers it is important that both, investors in shares and managers of companies seeking to make acquisitions, need to know how much a company is worth and how much they are willing to pay for their investment. Therefore, the authors outline the theoretical background of valuating companies and will show how different valuation techniques can be used in different contexts. As for every acquisi-tion, on the one hand the possible buyer should always bear in mind that: “Price is what you pay, value is what you get”. On the other hand it is also important to keep in mind that: “A thing is worth whatever the buyer will pay for it”. These are two statements which are also important beside the valuated company values. For that reason, the authors valuate Endesa with two different valuation methods including their different approaches. First of all the Discounted Cash Flow (DCF) method will be applied. Herewith the authors will use the three different approaches: entity, equity and the adjusted present value technique. Afterwards these results are validated with three different multipliers by using the multiplier method. The average result – without the result of the Discounted Cash Flow method / equity approach – of these calculation is an estimated share price of 41,81 €/share or a corporate value of about € 44,262 billion for Endesa. The last bid of E.ON was placed on 02. February 2007 with a value of 38,75 €/share this means a corporate value of € 41,027 billion.
Inhaltsverzeichnis (Table of Contents)
- Executive Summary
- Introduction
- Problem Description
- Objective
- Methodology
- Methods of Corporate Valuation
- Background of Corporate Valuation
- Valuation Methods
- Net Asset Value Method
- Liquidation Value Method
- Real Options Method
- Multiplier Method
- Discounted Cash Flow Method
- Parameters of the DCF Methods
- Entity Approach
- Equity Approach
- Adjusted Present Value Approach
- Earnings Value Method
- Overview of Endesa
- Company profile of Endesa
- Business Activities of Endesa
- The Financial View of Endesa
- Deals and Developments in the Energy Market
- The deal between E.ON and Endesa
- Corporate Valuation of Endesa
- Assumptions for the corporate valuation
- Discounted Cash Flow Methods
- Different Variables for the DCF Valuation
- Entity Approach
- Equity Approach
- Adjusted Present Value
- Multiplier Method
- Peer-Group composition
- Price-Earnings-Ratio
- Price-Bookvalue-Ratio
- Price-Cash-Flow-Ratio
- Wrap-up of Corporate Valuations
- Conclusion and Outlook
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This work aims to provide a comprehensive analysis of the valuation of Endesa, a major European energy company, in the context of its proposed merger with E.ON. The study examines different valuation techniques and applies them to Endesa, ultimately providing an assessment of the company's worth and its potential value to E.ON. The key themes explored are: * **Corporate Valuation Methods:** The study delves into various methods used to assess the value of companies, including discounted cash flow analysis, multiplier methods, and asset-based valuations. * **Energy Market Dynamics:** The work acknowledges the changing landscape of the European energy market, emphasizing factors such as increasing energy demand, declining reserves, and the need for a cleaner energy mix. * **Merger and Acquisition Strategies:** The document investigates the rationale behind the E.ON-Endesa merger, exploring the strategic and financial motives driving the transaction. * **Financial Analysis of Endesa:** The authors conduct a thorough financial analysis of Endesa, considering its business activities, financial performance, and market position. * **Valuation of Endesa:** The study culminates in a valuation of Endesa using multiple methods, providing an estimated share price and corporate value.Zusammenfassung der Kapitel (Chapter Summaries)
The introductory chapter sets the stage by introducing the problem of corporate valuation and the importance of this analysis in the context of mergers and acquisitions. The authors outline their objectives and the methodology used for the valuation of Endesa. The second chapter provides a comprehensive overview of various methods used for corporate valuation. This includes discussions on traditional methods like net asset value and liquidation value, as well as more complex techniques such as the real options approach, multiplier methods, and discounted cash flow analysis. The following chapter focuses on the specific context of Endesa. It provides background information about the company's profile, business activities, and financial performance. The chapter also analyzes the competitive landscape of the energy market and the specific deal between E.ON and Endesa. The final chapter, before the conclusion, presents the detailed valuation of Endesa. It begins by outlining the assumptions used for the analysis and then proceeds with the application of the discounted cash flow methods, including the entity, equity, and adjusted present value approaches. The chapter further investigates the multiplier method, using data from peer companies, to validate the results.
Schlüsselwörter (Keywords)
The core keywords of this work encompass various aspects of corporate finance, energy industry dynamics, and merger and acquisition strategies. These include terms like corporate valuation, discounted cash flow, multiplier method, energy market, mergers and acquisitions, Endesa, E.ON, financial analysis, and strategic goals. The study also highlights concepts like company valuation, market capitalization, share price, and corporate value.- Citation du texte
- Dipl. Kfm. (FH); Dipl. B.Inf. (FH) Stefan Kempka (Auteur), 2007, Corporate Valuation of Endesa, Munich, GRIN Verlag, https://www.grin.com/document/117697
