Busisiwe Huma CA(SA)/RA
, Valuations and M&As
Methods:
Gordon Growth Model
HOW TO VALUE Choose appropriate valuation method Net asset value
Market capitalisation
Earnings multiple
Free cash flow
Calculations:
HOW MUCH Establish the value of the business Formula applied
Payment:
HOW TO PAY Establish the payment method
Cash vs Shares
, Minority < 50% purchase
Question - No control as defined
purchase
per IFRS
Either Minority /
Majority purchase?
Either of the
following Methods applicable
- Gordons Dividend
Growth Model
Earnings
Gordon Dividend
Free Cash Flow Growth Model
(GDVM)
Reasonability Test = for all methods
NAV
Busisiwe Huma CA(SA)/RA
, How much = Formula?
Gordon Growth Model Market Capitalisation / Market
Details (DK – deemed knowledge from capital
structure) Based Valuation
Minority / No control over the entity
Shareholders (Control guidelines – Accounting IFRS – Business Any shareholding portion
Combination related accounting statements)
𝐷1
𝑃𝑜 =
𝑟 −𝑔
Po – Present value of the future dividend
Formula D1 – Expected future dividend (Do(1+g) Share price x No of shares issued
r – required rate of return = Ke*
g - expected constant . Sustainable growth
*CAPM
Income statement (historic data) Balance sheet - Determine number of
Dividend policy shares
What you need Details on entities growth Share price
Read carefully provided information
Exam technique Ke – you maybe required to calculate cost Read carefully provided information
it using CAPM = Rf + b(Rm – Rf)
Busisiwe Huma CA(SA)/RA
, Valuations and M&As
Methods:
Gordon Growth Model
HOW TO VALUE Choose appropriate valuation method Net asset value
Market capitalisation
Earnings multiple
Free cash flow
Calculations:
HOW MUCH Establish the value of the business Formula applied
Payment:
HOW TO PAY Establish the payment method
Cash vs Shares
, Minority < 50% purchase
Question - No control as defined
purchase
per IFRS
Either Minority /
Majority purchase?
Either of the
following Methods applicable
- Gordons Dividend
Growth Model
Earnings
Gordon Dividend
Free Cash Flow Growth Model
(GDVM)
Reasonability Test = for all methods
NAV
Busisiwe Huma CA(SA)/RA
, How much = Formula?
Gordon Growth Model Market Capitalisation / Market
Details (DK – deemed knowledge from capital
structure) Based Valuation
Minority / No control over the entity
Shareholders (Control guidelines – Accounting IFRS – Business Any shareholding portion
Combination related accounting statements)
𝐷1
𝑃𝑜 =
𝑟 −𝑔
Po – Present value of the future dividend
Formula D1 – Expected future dividend (Do(1+g) Share price x No of shares issued
r – required rate of return = Ke*
g - expected constant . Sustainable growth
*CAPM
Income statement (historic data) Balance sheet - Determine number of
Dividend policy shares
What you need Details on entities growth Share price
Read carefully provided information
Exam technique Ke – you maybe required to calculate cost Read carefully provided information
it using CAPM = Rf + b(Rm – Rf)
Busisiwe Huma CA(SA)/RA
