Applied financial mathematics

The choice of a valuation approach depends first and foremost on the underlying approach. Price is what you pay - Value is what you get" Warren Buffet. And a company's value is certainly not the same for all stakeholders!

So, in a transaction, beyond the 4 traditional approaches (asset-based via the balance sheet, market-based via multiples, potential-based via DCF and opportunity-based via real options), the buyer's perspective and the seller's perspective will collide.

From the buyer's point of view, there are four common strategies:

•  The predator (or bargain hunter) will take a "liquidation value" or "distressed value" approach to his target.
•  The speculator (or opportunistic financier) will prefer a "going concern basis" or "stand alone value".
• The strategist (investor-developer), on the other hand, will take a "fair value including synergies" or "replacement cost" view of the trade-off between organic growth and acquisitions.
• The BA or VC, who likes to have his eyes shine, but knows how to be realistic, will take "things in reverse". He'll start from an exit value in business model vision, discounted at a strict objective rate of return.

From the seller's point of view, the task is more difficult. "Look, don't congratulate us when we buy a company, congratulate us when we sell it. Because any fool can overpay and buy a company" Henry Kravis. The seller's strategy will be to exploit the reserves of value according to the context. To do this, he or she must consider each phase of the nugget's life cycle. And here, Aswath Damodaran's recommendations are sound:

•  Launch: EV / market
•  Emergence: EV / user
•  Take-off: EV / dirty
•  Expansion: Price Earning to Growth
•  Maturity: PER
• Decline: Price to book

Lastly, in all cases, buyers and sellers will have to converge on the inclusion of the risk factor. And to avoid a position war over the risk component in the discount rate, Monte-Carlo-type methods are becoming the benchmark for integrating an operational and controlled vision of volatility and uncertainty.

We look forward to discussing all these fascinating topics with you at this workshop!

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