Yannick Coulon’s research while affiliated with ESC Bretagne Brest and other places

This chapter explores the asset-based approach to valuation. It first underscores the advantages and weaknesses of owner’s equity recorded on the balance sheet as an indicator for the value of a company.

This book finds its full justification in the pragmatic valuation of a small business, SEGA, which is a golf management company. This case study highlights the valuation methods which remain abstract and theoretical without implementation. This valuation search does not flow like a long quiet river. No method is perfect in its implementation; therefore, all methods are complementary. The business appraisers must commit themselves, make reasoned choices, and lay their assumptions.

The chapter outlines the principle of the market approach. The subject company being valued is compared either to a similar company that has recently been sold (precedent transaction analysis) or to a group of companies that belong to the same industry and have analogous business models, described as the peer group (comparable company analysis). Once the comparison is established, the multiples of the comparable companies are applied to the aggregates of the subject company to obtain a value estimate, using the following formula:

This chapter defines fundamental value as the measure of a company’s future profitability. The discounted cash flow model is presented. It is used to calculate the present value of the projected free cash flows. The applicable discount rates are explained. The dividend discount model is also presented. Several short case studies and illustrations are included. Key takeaways on the DCF method and its limitations conclude the chapter.

This chapter outlines the essential metrics utilized in valuation. The core of the chapter focuses on enterprise value and equity value. The final portion of this chapter addresses the importance of understanding a company’s positioning and strategy as a prerequisite for analyzing its financial statements. Several short case studies and illustrations are included. Key takeaways on these metrics and their limitations conclude the chapter.

“Small Business Valuation Methods: How to Evaluate Small, Privately-Owned Businesses represents a well-written and organized contribution to the business valuation existing theory and practice. It positions itself on the market as an useful tool to approach business evaluation, suited to business owners, professionals, accountants and business students.” —Marco Fazzini, European University of Rome, Italy Valuation is the natural starting point toward buying or selling a business or securities through the stock market. Essential in wealth management, the valuation process allows the measurement of the strengths and weaknesses of a company and provides a historical reference for its development. This guide on valuation methods focuses on three global approaches: the asset-based approach, the fundamental or DCF approach, and the market approach. Ultimately, this book provides the basics needed to estimate the value of a small business. Many pedagogical cases and illustrations underpin its pragmatic and didactic content. However, it also contains enough theories to satisfy an expert audience. This book is ideal for business owners and additional players in the business world, legal professionals, accountants, wealth management advisers, and bankers, while also of interest to business school students and investors. Yannick Coulon has 15 years of banking experience with the Suez Group in France and UBS in Switzerland and 10 years of experience with Iomega Corporation as product manager for the Zip drive in Europe. Yannick also teaches finance, including behavioral finance, at a business school in Brittany, France. He owns and manages four golf courses with his brother Emmanuel in western and southern France. He, therefore, has dual experience in teaching and managing small private companies.

"Offering an interesting contribution by expanding ratios beyond their immediate applicability, this book is a must-read for both students and professionals in the accounting and finance fields, especially those keen to stay up to date with the latest information." —Razvan Hoinaru, Queen Mary University of London, UK Explaining the underlying logic behind financial ratios, this book adds to the discussion on the importance and implementation of ratios and illustrates the essential role that they play in company evaluations and investment screening. The author explores how ratios establish a proportional relationship between accounting and market data, and when well-integrated into a global company vision, can become powerful indicators capable of outlining relevant information and identifying warning signs. Going beyond merely listing possible ratios and looking further into their implementation, each ratio family is demonstrated with numerous graphs and practical case studies involving companies such as Amazon, Walmart and Alibaba. With a focus on behavioral finance and enterprise value, this innovative Palgrave Pivot will be of interest to investors, bankers and entrepreneurs, as well as finance scholars and students.

The first chapter outlines the essential metrics used in financial ratios. The core of the chapter focuses on operating assets, capital employed and mostly on enterprise value (EV). EV is an essential metric that will be extensively used in profitability ratios. Several short case studies and illustrations are included. Key takeaways on metrics and their limitations conclude the chapter.

The implementation of ratios is useless if applied irrationally. As a consequence, the principles behind an investment thesis are outlined, adding a touch of behavioral finance to counter investment biases.