The Octopus: Valuing Multi-Business, Multi-National Companies
42 Pages Posted: 17 May 2010
Date Written: November 17, 2009
As both investors and firms globalize, it should come as no surprise that valuing these firms brings special challenges. In this paper, we look at firms that not only operate in many countries but also in diverse businesses. The different risk, growth and cash flow profiles of the cash flow streams generated by these firms requires us to reconsider how we estimate discount rates and approach valuation. We consider how best to value these firms as consolidated entities and contrast these valuations with an alternative, where we value each part of the firm separately and use the sum of the parts to value the businesses.
Keywords: Multinational, Valuation, Sum of the Parts
JEL Classification: G12, G31
Suggested Citation: Suggested Citation