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About the course
Professionals in all roles in business, from the C-suite executives responsible for investment decision-making and corporate finance strategy to all those who advise and support them, require an understanding of the value impact of business decisions. The field of valuation is full of short-cuts and rules-of-thumb which, while quick and pragmatic, may inadvertently result in damaging, or even catastrophic, investment decisions. In the field of valuation, it is all too tempting to slip into simple mechanical processes without analyzing why one is doing things in a certain way. Indeed, the failure to understand the deficiencies in the standard approaches, and inability to ask the right questions, may explain why so many investments and acquisitions result in the destruction – rather than creation – of value.
In the Advanced Valuation program, participants with experience in valuation are exposed to a conceptually challenging curriculum, exploring both the theoretical basis and practical application of the major elements of discounted cash flow valuation. They learn to differentiate between long-term value-creating strategies and short-term indicators, such as share price, earnings per share, market share, revenue growth, increased profit and customer satisfaction. Above all, they learn to ask the questions that will build value for the future.
How you will benefit
- Understand the “why we do it that way” behind valuation concepts you practice daily
- Enhance your awareness of the key finance principles which underpin our approach for estimating the discount rate used in valuation
- Develop the capability to distinguish value creation from value destruction to ensure competitive success and the long-term survival of your company
- Learn and practice a process for conducting a data-driven, theoretically correct, valuation
- Be able to handle cross-border, emerging market, and other complicated valuations
- Question common practices and identify common mistakes and misunderstandings
Advanced Valuation will work through a series of conceptual and numeric examples, conducted as group work as well as in plenary discussion, in addition to a long case study enabling participants to deepen, and exhibit, their understanding of the fundamental concepts. These cases will also enable participants to practice the steps in the data-driven, unbiased, valuation process being taught in this program. The process and the conceptual basis for this approach to valuation will be explained and elaborated on Day 1, and the refinement and application of the process will be further illustrated, and practiced by participants, in the case studies and class discussions of the remaining three days. The main topics to be covered include:
Conceptual Basis and Building Blocks of DCF Valuation
- What is value and why do we care?
- Distinguishing price and value
- Defining value and distinguishing value creation from value destruction
- Distinguishing value creation from value transfer
- The economics of supply, demand and sustainable competitive advantage
- The connection between industry drivers of competitive advantage and valuation
- Understanding and estimating the discount rate (the Opportunity Cost of Capital)
- Distinguishing key performance indicators from value drivers
- Performing historical/financial analysis
- Developing an unbiased, data-driven forecast of future cash flows
- The mechanics of estimating continuing value
The Opportunity Cost of Capital and Complications
- Components of the discount rate (the Opportunity Cost of Capital), including the risk-free rate and adjustment for risk
- Incorporating risk – diversifiable versus non-diversifiable risk and asset pricing models (CAPM, APT)
- The impact of leverage and the Adjusted Present Value (APV) and WACC methods
- Emerging markets and other complications
Who should attend
Advanced Valuation is designed for experienced professionals who want to expand their knowledge and gain new insights into company valuation.
Participants should have valuation experience and be familiar with the basic valuation concepts, such as definition of free cash flows, the costs of capital, the Capital Asset Pricing Model and/or the Arbitrage Pricing Theory. For those who do not have sufficient knowledge of valuation theory, AIF’s Valuation program can serve as an introduction to the topic.
Trust the experts
Kevin Kaiser joined the finance faculty at INSEAD in 1992 where he is currently Professor of Management Practice and Director of the Transition to General Management programme. Kevin is also Director of the ABN Amro Managing for Value Research Fund at INSEAD, and is active in conducting and shari...
Program Profile: Advanced Valuation with Kevin Kaiser