ACCA P4 BUSINESS VALUATION

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hello this is steve from acca
dot-com so today way today is to look at
the piece father
so just look at the business valuation
they would see Lee five aspects like
today being a voice time
alright so first aspects against the cat
is why do we need to find your business
so against you look at the reasons why
we get to find that base of course one
of the reasons will be going to acquire
another company that's why we need to
know it started before we have to play
this
ok so after we notice why do you have to
evaluate these days the second question
bae are there any valuation that we can
use in order to one-up business so most
invested most of the methods over here
you learn in your nice today we're going
to take third of people to be
comfortable with the exam questions and
also we looked up house divided up these
days
easy to determine where they will not
forget the pie shell does by cash or
shares and also we've done that of
course in the rear I've respectively
listed companies they are facing the
host i'll be everyday which may mean
that some of the other companies more
may want to file shares in order to
remove the management of our company as
a result the base of course this is not
in the best interest of the company as a
result about their defenses beaten egg
again to protect our company not being
acquired by and I
company objective just to remove the
complex because they're not satisfied
with our practice so that so that
they're going to acquire company to
remove all about directed so many
offensive is look at so this is our next
question mr. defenses today hosts file
bits so finally we're going to look at
something caught the regulation tours
the taker which means quiet like an
accompanying the oceans we need to
follow
well it depends where we're going to
introduce the UK citigo city code over
here just to try to give you a flavor of
how regulation work
ok so let's start off by a look at the
first question which is the reason why
we get your body business so when
talking about the reasons to body-based
can see there will be three reasons in
here
ok so first reason may we against
inviting that business because we're
going to do some sort of M&A in order to
get some synergy ok
as a result of the nurse positions right
yeah
so see the gym is that after climbing is
completely can generate more wealth so
shoulders which may mean that one that's
one tactic residents oh no what we what
we mean by merging what we mean by
acquisitions so murder
it means that one that's comfort to
equals today comfortable position is the
county one plus two equals to complement
plus comforting thought our first magic
is that after managing his company
inside business.com disappear so one of
the famous Excel will be here
Dobie system and the macromedia after
the adobe system manages they macromedia
company macromedia complete does not
exist anymore but instead the products
from the macromedia and now being so in
the adobe systems website so this is one
but they're okay
it can't be 1 plus company 2 equals to
accompany one but what about the
acquisitions decision means it gets
quiet become a subsidiary as we service
should confidence axes to complement
plus constant equal to v1 plus completed
next question is about synergy so
synergy how we get your ing how do we
help me one plus one is activated in
soon the basket display taking the
example for MPC
hunting practice enter one of the ways
we can grow our business is to try to
acquire another company in order to
expand our business activities so here
APC your purchase our course of course
you can get the videos you can get this
study materials study materials made for
the study note so you need to print the
study notes on your mat because they're
from different countries
yes all around the world instead of the
students but what if i'm going to say to
you I'm going to print those study nose
for you from that perspective while I
need to find somebody else to pray that
study notes
yes and then try to belittle to you but
warty i'm going to acquire those
third-party exploiting the previous
service so that i can your consultant
that company and then use that company
to print them here is so rate for APC
students rather than some next was so
two basic kinds of the research base
this is what i mean by backward
integration because it integrates ok
because it integrates with our suppliers
printing so speaking of business for you
together so that your purchase of course
invited you here biting you if they
printed study materials so that yes
maybe 1 plus love great into so this is
the idea behind me to some of the scenes
will be a cost savings
yes and also read new generations so as
a result about climbing on the company
because save costs we can increase our
revenue
section this morning about synergy next
reason why we're going to bother about
business and start the business is going
to go in this state so as a result of
its respective what you're trying to do
the IPO initial public although its
hermie share is you get to sell all to
shame as a research base there's no
point that you don't know about the
value of their company that trying to do
trying to get Tony the share price again
except there's no point doing that one
of the ways we can do is to try to
estimate they total body confidence
that's what we need to buy the business
and divided by the number of shares for
coaches issue with so basically get the
share price per share
we're going to set off to the public ok
so in other reason why we're going to
find that is a start and his seventies
don't fall market which may mean that if
you look at in this way for the public
listed companies the share price quoted
on to stop exchange is to be fifteen
dollars a share of mistakes
meanwhile Steve I'm going to bind our
base by trying to take these 15 boards
for share multiplied by the number of
chefs so that we can get the total body
that pumping and I corrected his own
love the outer space yes maybe
oh why well the simple reason being know
is that while the fifteen dollars a
share over here does not include they
sent John law market in places such as
the inside the information so 50 bucks
for share that's not including inside
information so that's why we're going to
actually buy the shares and so it the
next day of course maybe share prices
actually are fluctuating not because of
inside
information so that's why we need to
value our business not just it's like to
share ice bar x shakes giving us the
total value of the company the rod we
need to do some sort of adjustment next
up so we can consider this signing much
and in relation to those starts when we
need to find out company ok basically
three reasons first thing we're going to
do some ma those snack positions to
write the signature so that's what we
need to divide your business
secondly probably scared mystic and
thirdly we need to consider the insider
information
ok so it is obvious question which is
they are reasons why we're going to buy
the business the second plus to pay at
the end evaluation that ok in a few for
exam
they'll be a tight one position that fit
tight soon decision third and type 3
there and once we finish off all of
those against the cat black so option
right oh that's so awesome place for
their the church of body a particular
complaint black so surprised when we're
looking up the previous actions now
we're going to repeat that again
so let's look at the punishment bit more
detail
so I say to you
the vibration effects because you have
the time one time to type free and also
back so option is in order
the question is what are the helmet
fitting each type of these allegations
against used to bind up so first of all
we're going to detail its height 1
acquisitions so before deep into this
fight one touches my free acquisition
detail it going to tell you what ACA
let's divide it different eyes the back
positions into thai to try free
well if you look back here this is based
upon the risks so we mean by that is
that we're going to consider the
business risk as well as a financial
risk after climbing this company
business race will change it we are
going to diversify our activities which
means variation acquire the new company
in the new industry different listing
financial risk will change if we're
going to borrow more money from the bank
yes maybe we can get some sort of know
the government subsidies sector so that
the giving of a comment actually changes
so the Federation changes so for the
title and position the business race and
finance risk remains the same which may
mean that we go to acquire come
introducing the same state as our
company also we do not have to borrow a
large amount of debt to change the
gearing of the company so that's a
socially position so that we're going to
use the type of the type to make it
seems say that the business risk will be
the same but the financial risk will not
be the same which may mean that we're
going to acquire a company in saving
this thing as I'm complaining
that's the result of that climbing this
company needs to borrow a lot of effect
so quite a company's research based
business risk remains the same as the
last risk actually changes but its
height free position we're going to
assume that quiet company which is not
in the same state as a company which
means the business risk will change and
also going to borrow a lot that's so
that they so that they giving pumped
actually changes as a result of the
Opposition company that's why we're
going to use the type free activation of
it so let's have a look at its height on
a position that there's much more detail
ok title acquisition that fits their
could see the three types of some
acquisition methods within the one that
you have already seen your nice day
first thing we're going to use a book
value approach where we're going to
focus upon the SF same or they the teeth
really upset and then we're going to
consider how to value the intangible
assets as well
so hows value in terms of our texts
really think so if exposed question is
what will be back in time Sparsit
intersect the outside we can't touch
that perspective you think about ninety
90 as it's looking just do it how we're
going to value that segments just do it
what is value ok forget to use some
effort that's locking said they once
were looking at us again it'll cut the
market-based approach where we're going
to focus on the p/e ratio and also the
model
ratio is a ratio to charge masher the
price-earnings complete the try to
estimate the future growth of the
company the bigger about the better
again . show always available from the
stock exchange you want is that how much
did we can get from the ship so it is a
measure of day shape return our aim is
to maximize the shape of shows well II
close to be giving you lots the captor
game i can either get from that company
to increase the cash in hand so that
maximize the shows
well all I can enjoy this increase in
the share price as was so based so it
off to the party so that i can only
capture game out there so market-based
approach and once you look at the
beginning to focus upon the catch tho
approach first thing we're going to look
at something called the dividend
valuation
so why do we save the castro approach is
stuff the dividend if you think about
your comment study if they come plays
out then it's going to be the returning
credit cash as a result of course the
dealer is a catch
so we're going to assume that it didn't
we can get the signal from that company
is input choosing from that perspective
you get the dealer / cost of captives so
we can get the value of the company but
secondly the free cash flow approach and
thirdly we're going to look at the
economic value of it was on the
relationship between two free cash flow
approach is looking at the bar become be
asked that too . in time but for the
economic value we're going to look at
the value probably from the .
perspective but does it matter what the
answer is yes that's nothing because if
I'm going to focus on the volume at some
point in time maybe the Muslim they have
some sort of shorts and behaviors might
imagine what you missed is money into
the punishment asset which was set so if
that is the case it is not good for the
company's long time but rather get a
look at it appears perspective .
perspective so that we need to do a lot
of adjustment so that we can say well
some sort of items even though it is an
expense we have spend into company like
chain costs but I say that it is good
the compass on him so that that's why
we're going to add it back again into
this time in into the value of the
company
massive profits here because added by
the expenses chain costs because it's
good for the company long-term
perspective so this is the idea of
finding ok sir that's enough for the
introduction certainly guesswork out of
a title that position is much more
detail
ok so let's look at the first one is to
book value approach so we need to go
back to your study notes try to look at
some sort of some sort of questions
yeah so the first question we are going
to look at is called cheering okay study
notes required to calculate the
vibration for the sugar content based on
his next article it so what women but
net assets he starts going to tape and
social assets minus liabilities
I know what you're thinking
well state don't have supported this
because you can get to equity out of the
state and the first position so that you
can use the internet but use the equity
value as the evaluation
am I correct for the art space because
next us approach over here we are going
to take into account only for The Times
wasit excluding any of these parties
okay and also the stable position
provided to us here maybe that's not
include up-to-date information
let's see the RC bigger so for example
if i go to providing our PE but here in
the stable distribution it is just an
historical figure to look back to notice
to do some sort of adjustment next up
the mandated that I don't we take the
bigger am I correct to do so you can say
see ya know so that's why we're going to
use our set- the library today so we can
get everything ok so let's look at this
question posted question BB non-current
assets maybe Totec will be total
liabilities fun and they note to get is
that key 8 as a replacement body of 51
about placement replace the audio is
obligation with plays this particular
pba in the current terms
ok so from that perspective we can stop
this replacement value into SF bay as
you replace the body of 100
yeah you may argue that well Steve
although i can get the assets out of the
market for 15 now instead of 100 many
years ago but we get these are from the
market it is the new assets from the
market by the arts I'm coming using it's
been many years ago and it's not because
those needs to be depreciated so you
have to consider the depreciation here
for the Artemis maybe yes maybe there
because we're not totally question any
of these depreciation expenses that
we're going to ignore that me some
questions if you are given any sort of
figures about depreciation so that you
need to calculate the depreciated
replacement value
simple example we are going to say we're
going to prepare the state constitution
which is just to say ass day previous
one
we're going to adjust for somebody's
first thing instead of 100 begin should
replace it with 5000 yeah and the second
note here is that first ascent of the
men are no longer required by the
humidity was so pissed we need to get
rid of it so we're going to take 10
because the original value minus hand x
% giving us free and we're toast the
question that these particular mentors
can be sold to customers pseudo-dollars
as we serve is of course we need to plot
so so you can get a ride to figure 9
ok so this is the SF bay next question
is how to evaluate of course we're going
to take the assets minus the liability
and I guess we are only considering the
tangible non-target that perspective
we're going to take 15 plus 24 the
island which was set and also plus 9 the
event rate plus 15 for the receivable we
need to minus any of these 30 yeah 30
good finger is intangible asset you may
have a question
well Steve you got it back on the
intangible assets excluding the goodwill
y lo soon because the only time since i
have recognized it into the SMA because
it is identifiable because we've got the
contact
okay we've got a contact to those
fantastic maybe we have purchased the
copyrights
is the legal right that kind of thing so
from that perspective need to include in
your calculation there's no point out
saying is the only person that intense
bars that but you're going to exclude up
into your value of the business
compilation ok for the good well here
recognizing the goodwill and stands for
maybe in the cancellations perspective
the excess amounts have paid to acquire
that substrate from not perspective does
it mean something on the answer please
yes me that we need to exclude that
minus the total liability is to be 45
yeah also it's minus the probability
given us first night the next task
figure so first thing I will be the
value of that business am I going to use
this first first night tutor me that's
we're going to play maybe 40 today that
the answer is no because our uation it
is not an accurate science
ok it is just an armed which may mean
that the prize-winning 2ds we are going
to tell you two are so to match the
company will be fruit negotiations
ok so that's why most become like to use
the next artists approach as a basis to
find that company
ok as a basis / company we're going to
use lots of methods its body that
company giving us the total figure
didn't give us the different beers so
that's why we're going to use those
figures as a range to tell me what
prices being a pipe full to shake this
let's ball
ok so that takes more and is this method
good about what do you think that asks
me that while it's good i guess all the
information from the SFA and they happy
they have been audited to the
information will be reliable
yes but you know it is stop it is
subject to manipulation but management
especially by another company the time
you complain much they try to revive
these are top
yes in wanted to argue a better price
yes that happens quite a lot going to
change the method value are you make
straight from lifo from a weighted
average to fight for method as a result
of its closing great mentor bodies
actually images to argue a better price
may begin to apply for a less amount of
allowance for receivable balances so to
boost it received buses up so that
increase the value against it
increase the price you pay for me so
it's subject to manipulation especially
with accounting policy and can estimate
like management so that's why we're
going to Savior it's just the bases
going to look at this are set
it's just the bases too by without pc ok
sir
after looking at and we're going to
focus on day 6 15 wrote to try to value
just do it tonight is
detective sex so you can see ya in
parsecs going to the is number 38 me to
exam is that i can only recognize those
in x % only if they are identifiable of
course they will feel the acid
exhibitions play so-so side effects such
as the customer relationship such as his
back beautification such as slugging
that kind of things those not gonna
reputation relationships it's not been
purchased by third-party it is just the
volume Express on your mind from that
perspective we cannot recognize that
value into SF bay but rather only if you
catch my party of course I can recognize
desponding so from that perspective for
the internally generated goodwill
including the reputation is locking and
also relationship with customers how we
finally of course we're going to use two
bodies begin to use the CIP we're going
to use the M simple that cid red means
we're going to calculate intangible
value so this morning I see me calculate
volume mb is the market to book approach
ok so we're going to look at one long
first thing let's focus on the CIP
approach the volume slot so looking back
to in that which we can see the idea
behind the CIA is that we're going to
take the outreach for being divided by r
which are set so that gives us the
percentage for example to say
it'll be wanting so it wasn't waving
your company operating in CD education
in the state but from the market
perspective the in the street outreach
for this particular figure is to be just
too intimidating but you don't want to
take industry is to be presented the
cluster is why they'll be a difference
between it's given they're using the
same property plant equipment same
lecture that . well the answer is of
course is because of inclement weather
set your compy house for example you
have a very good reputation from the
customers that's the Ares is my
collections to get this research that
will be better than the industry average
of just saying that because you Steve to
generate into feet chip can only benefit
given us the figure of 20-plus myself
captain the differences will be Tim said
so dead-set will be comfortable fighting
so this is the idea behind it
ok so let's look at the example just to
illustrate what's going on
okay so this question is cold and CB is
called independence limited we want to
calculate the value of the antibiotic
music ACIP wrote so we're totally
question that outreach Paul week before
taxes the company's 2626 the 6.2 assets
of the independent company 230 dollars
so from that perspective we can work out
the outreach is now we're going to
starting place bodies your question is
called
independence limited so first they three
turn on the asset of the independence
imitate is to be 66 points 0 / 2 and
giving us one smiling . well it is
returned from the assets from using
these assets so 66.2 is the outrage .
for tax bigger day is the answer finger
fine the next thing is that we
intelligent question that they are great
and pre-tax in the industry's to be
twice so I figure the industry is to be
one thing so from that perspective
I'll company i'm going to operate the
same set i can have a point about twenty
percent of the time in the state is to
be 20 excess amount will be nine cents
over yet will be due to the handset
maybe because of this locker so that's
nike has sold more shoes than any of
these are the competitors
yes so from that perspective the ask
essence return is that we're going to
take the essays and articles might send
over here x day i'll say finger
yes that they independent
is currently operating of super team so
that you can give us 21
ok so from that perspective that they
and asset attachment of the independent
limited is too because walls but it's at
the end of these costs about the answer
that because our company is operating on
a going concern basis into the receiver
future also decreased can't say that
well and you get in touch about it . one
balls so after we got this asset company
will go back to stopping and starting
ok it's not the case for independence
limited what the Army's make sure that
that's why we need to take into account
the chip aspect for this interpreting so
we're going to say that the value of the
assets
our tax equals 21 others x 1 minus the
tax rates be given the question is to be
first % / the weighted average cost of
capital is to be then saying given us
127 ok we're going to take into account
the future aspect swell
ok so that's why we need to take an
infinitive great want to take they ask /
the cost of capital city gives us the
total value for the sponsor because the
time I said yes we need to pay tax on
that capital gains that start planting
eight know so that perspective yes need
to take into account the taxi back to
give us some and 147
ok so let's finish off our independence
limited and this is the CIB approach
which is quite stable it but it's not
good about for the CID approach so it is
good because it's called staple is that
so the idea would be quite state board
but the downside of that is if you're
going to look back here we're going to
take the arledge Paul before tax / the
of which are set of the company which
may mean that the average began to take
you want you to your free for you find
6/6 if you're going to take six years so
it doesn't give us gives us a clue of
how the years which you select in order
to calculate the value of the about the
body of the entire pausing let's see
company first-year operating species
well it would be lost faking so from
that perspective you are going to take
that amount is the calculation of a part
it would drive the step should i use the
reason three years for that the Ospreys
yes no because well if you're going to
use that one of the year that companies
operating is just to be loss-making on
payback and say that is no problem at
all in this free years as a service
provider type of assets actually equal
to 0 but is this is the case of the ass
basically no yes there are some
limitations with the Gospels CIA
approach
ok it is just that gets low using this
approach we're going to introduce
another method is called mb approach is
the market
to book bottom edge try to value not
complete
so the idea behind it is that the
company has a market value that safety
is to be wanting but the book value that
companies just to be 10 why
well its name that although i had a set
of 10 but now that we're trying to see
all these are set
it's not just to be 10 but rather is to
be 20 is simply because maybe he has
lots of advertisement so that creates
the bank at the the brand recognition
within the market as we so to this
excess amounts between two will be in
passing
ok so from that perspective so let's
look at the MVPs here so i SAT here then
the book vol 2 tote equities to be soon
dollars and share prices to be twenty
dollars each
they will be questioned Chesney ship as
a result of it
this is the value and this is the market
is to be four dollars because multiplied
by share price we love the shape so then
we're going to compare the market value
of the book rounding forward and soon
given us to figure out of tune with the
body of the classes
ok so these are sort of things you need
to know in the exam nothing more
waiting so that's quite stable isn't
okay so we've been this off the first
and approach the Titan decision is the
body where we're going to focus upon the
financial statements