ME PoV Spring 2014 issue
Some common mistakes
Estimating and applying discount rates
One of the most critical issues for an investor to consider in a strategic acquisition is to estimate how much the company being acquired is worth. On the back of the 2008 financial crisis, a valuation is being looked at not just as a static value at a point in time, but more as a basis for developing a post-acquisition operation plan to drive value accretion and minimizing risk. As such, the Discounted Cash Flow (DCF) analysis is being more frequently used to value companies.