There are various occasions for a corporate evaluation: purchase, sale, privatization, IPO, evaluation of growth options, preparation of business restructurings and much more.
This work’s occasion is to determine the corporate value of Fielmann AG from a buyer’s point of view. Somebody wants to invest in Fielmann AG to optimize his own portfolio.
The first part of this assignment describes the framework of a corporate evaluation. After this introducing part, the common methods and approaches of a corporate evaluation, emphasizing the respective advantages and disadvantages, is discussed. The second part applies selected methods to the evaluation of Fielmann AG in practice: The discounted cash flow methods (entity and equity approach) and the multiplier method.
The date of evaluation is December 31st 2011, all data are accessible to the public (mostly via Bloomberg) or based on own assumptions. The applied discounted cash flow methods of corporate evaluation result in a valuation range between 2,923.941 and 2,999.810 million EUR. The multiplier method determines range for the corporate value from 1,429.049 million up to 1,547,258 million EUR. Therefore, for an investor it is fair to pay a price between 34.02 and 71.42 EUR per share.
It is hard to find an adequate peer group for Fielmann AG because there is no other optician listed which is comparable to Fielmann AG. Therefore, the authors recommend the DCF-results an adequate value. The DCF approaches deliver a final result between 2,923 up to 3,000 million EUR (69.62 up to 71.42 € per share) on 31st December 2011 for Fielmann AG.
Table of Contents
1. Introduction
1.1. Problem Definition and Objective
1.2. Scope of Work
2. Framework of a Corporate Evaluation
3. The Corporate Valuation Theses
3.1. Net Asset Value Methods
3.1.1. Liquidation Value
3.1.2. Reproductive Value
3.2. Discounted Cash Flow Methods
3.2.1. Entity Approach
3.2.2. Equity Approach
3.3. Multiplier Approach
3.3.1. Comparative Company Approach
3.3.2. Multiplier Design in the Comparative Company Approach
4. Evaluation of Fielmann AG
4.1. Company Profile of Fielmann
4.2. Discounted Cash Flow (DCF) Methods
4.2.1. Forecast of Future Cash Flows
4.2.2. Cost of Capital
4.2.3. Entity Approach
4.2.4. Equity Approach
4.3. Multiplier Method
4.3.1. Analysis of the Valuated Company
4.3.2. Building up the Peer Group
4.3.3. Calculations and Aggregations
5. Result Comparison and Conclusion
Objectives and Topics
This work aims to determine the corporate value of Fielmann AG from a buyer's perspective as of December 31st, 2011, utilizing both theoretical valuation frameworks and practical application of selected methods to provide an informed investment range.
- Fundamentals of corporate valuation frameworks and the IDW-Standard
- Theoretical analysis of Net Asset Value, Discounted Cash Flow (DCF), and Multiplier methods
- Practical application of Entity and Equity DCF approaches for Fielmann AG
- Comparative Company Approach (CCA) design and peer group selection
- Synthesis and verification of results to define a fair corporate value range
Excerpt from the Book
4.2.1. Forecast of Future Cash Flows
As in chapter 3.2. already mentioned the future cash flows play an important role to determine a company’s present value. To forecast these cash flows it is necessary to consider the company’s strategy and strategy goals. Due to the medium-term goal of a total revenue of 1.3 billion EUR, the revenue in 2012 is assumed by an average growth rate of the current and the last five years of 6.24 %. Concerning the following years a decreasing growth rate is forecasted. For terminal value the growth rate is determined as one percent plus the perpetuity of zero percent in this case, considering a conservative perspective and the hierarchical managed company by Günther Fielmann. In the five upcoming years, Fielmann will further increase because the company has a well management and the demand on glasses will increase, too. The demographic is one reason for this. A decisive role is played by Günther Fielmann, who is nowadays 73 years old, when he will leave the company and when a successor will continue Fielmann’s business.
Summary of Chapters
1. Introduction: Presents the motivation and objective of the work, emphasizing the distinction between price and value in a corporate transaction context.
2. Framework of a Corporate Evaluation: Outlines the economic and legal conditions, specifically referencing the IDW-Standard as the primary guideline for corporate valuations in Germany.
3. The Corporate Valuation Theses: Discusses theoretical methods including Net Asset Value, Discounted Cash Flow (DCF) approaches (Entity and Equity), and the Multiplier approach.
4. Evaluation of Fielmann AG: Applies the theoretical frameworks to the specific case of Fielmann AG, including company profiling, DCF calculations, and the Multiplier Method.
5. Result Comparison and Conclusion: Synthesizes the findings from the DCF and Multiplier methods to provide a definitive recommendation on the fair corporate value of Fielmann AG.
Keywords
Corporate Evaluation, Fielmann AG, Discounted Cash Flow, DCF, Entity Approach, Equity Approach, Multiplier Method, Comparative Company Approach, CCA, Terminal Value, Cost of Capital, Market Capitalization, Valuation, Financial Analysis, Investment
Frequently Asked Questions
What is the primary focus of this research?
The work focuses on the practical corporate valuation of Fielmann AG from the perspective of a potential buyer as of the fiscal year-end 2011.
Which valuation methods are applied?
The authors employ the Discounted Cash Flow (DCF) method, specifically the Entity and Equity approaches, alongside the Multiplier Method (Comparative Company Approach).
What is the core objective of the study?
The objective is to calculate a fair corporate value and a price-per-share range for Fielmann AG to assist in investment decision-making.
What is the role of the peer group in this analysis?
The peer group serves as a benchmark for the Multiplier Method, enabling the verification of the DCF-based valuation through relative market comparisons.
Why are both DCF and Multiplier methods used?
The DCF method provides the core valuation based on future cash flows, while the Multiplier method acts as a vital validation tool to check the plausibility of the results.
What do the final valuation results suggest?
The authors recommend a value range between 2,923 and 3,000 million EUR, corresponding to 69.62 to 71.42 EUR per share.
How is the problem of circular reference in the WACC calculation addressed?
The authors solve the circularity by utilizing an iteration (recursion) method, starting from a fixed balance sheet value until the results stabilize.
What significant challenge did the authors face when selecting a peer group?
The authors noted the difficulty in finding a perfectly comparable listed optician, necessitating the selection of a broader group of consumer-sector companies.
- Quote paper
- Bachelor of Arts Alexander Zureck (Author), Dipl.-Kfm. (FH) Tim Böker (Author), 2012, Corporate Evaluation of Fielmann AG, Munich, GRIN Verlag, https://www.grin.com/document/201564
