Valuing Companies: An Overview of Analytical Approaches

5 Pages Posted: 14 Jun 2009

See all articles by Robert S. Harris

Robert S. Harris

University of Virginia - Darden School of Business

Abstract

This technical note provides an overview of a valuation network: multiples, options pricing, specific-asset valuation, and present value. The strengths and philosophies of each approach are discussed in the context of valuing companies. Variations of present-value approaches are also discussed. The purpose of the note is to furnish a conceptual overview rather than to go through the mechanics.

Excerpt

UVA-F-1187

Rev. Jan. 25, 2017

Valuing Companies: An Overview of Analytical Approaches

Practitioners have devised numerous frameworks and analytic techniques to value companies. Such valuation approaches are also used to value portions of existing companies (e.g., divisions) or investment proposals (e.g., to build a new facility). Each approach has its strengths and weaknesses and a combination of approaches often provides insights not obtainable from a single technique. This note highlights major approaches to valuation.

One can partition valuation approaches into four groups as shown in Table 1. Within each category there are many variations, but each category is motivated by a different philosophy of valuation.

Table 1. Valuation approaches.

. . .

Keywords: acquisitions, present value, valuation

Suggested Citation

Harris, Robert S., Valuing Companies: An Overview of Analytical Approaches. Darden Case No. UVA-F-1187, Available at SSRN: https://ssrn.com/abstract=1418842

Robert S. Harris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

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