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Valuation: Avoiding the Winner's Curse [Hardcover]

Kenneth R. Ferris , Barbara S. Pecherot Petitt
2.0 out of 5 stars  See all reviews (1 customer review)
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Book Description

Jan. 24 2002 013034804X 978-0130348043 1

In Valuation: Avoiding the Winner's Curse, authors Kenneth R. Ferris and Barbara S. Pecherot Petitt will help you master both the science and the art of M&A valuation. Concise, realistic, and easy to use, it brings together the field's best "rules of thumb," compares every leading traditional and alternative approach, presents examples and case studies from many industries, and offers practical solutions for today's key accounting, reporting, and tax-related challenges.


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From the Inside Flap

Preface

Valuation is the essence of finance. It asks the question, "What is the 'fair' price to pay for an asset that has a set of uncertain future cash flows?" In the past, the answer to this question was provided by time-tested methods. In recent years, however, new approaches have emerged as practitioners have sought improved ways to assess value. New approaches have also evolved in response to the development of the "new economy" and the many e-commerce companies that were privatized without a history of either earnings or cash flows.

With the backdrop of a rapidly changing valuation environment, this book presents a practitioner-oriented view of the fundamentals of firm valuation. The focus is on valuation for acquisition purposes. In large measure, an acquisition is viewed herein as equivalent to the purchase of any productive asset, namely, as a capital budgeting exercise. Furthermore, valuation is considered to be an art, not a science. Consequently, the reader will find that there are many "rules of thumb" but few inviolable principles to guide them.

The metrics used for valuing companies are not well defined, varying often according to the objectives of the valuation and often with the companies themselves. Consequently, executives and equity analysts face many choices and dilemmas as they try to assess value. Throughout this book, practical solutions are suggested for dealing with these dilemmas and for helping the reader make informed choices. The methods discussed are principally for use in nonfinancial companies; the topic of valuing financial companies is beyond the scope of this book.

To use this book effectively, the reader will need an understanding of the fundamentals of accounting and finance. Furthermore, a background in spreadsheet software, such as EXCEL, is also beneficial.

From the Back Cover

In Valuation: Avoiding the Winner's Curse, authors Kenneth R. Ferris and Barbara S. Pecherot Petitt will help you master both the science and the art of M&A valuation. Concise, realistic, and easy to use, it brings together the field's best "rules of thumb," compares every leading traditional and alternative approach, presents examples and case studies from many industries, and offers practical solutions for today's key accounting, reporting, and tax-related challenges.


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"On 24 June 1997, the major financial newspapers carried a significant press release from Eli Lilly and Company, one of the world's leading pharmaceutical companies." Read the first page
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Most helpful customer reviews
2.0 out of 5 stars Met the man, taken his courses... July 1 2004
By A Customer
Format:Hardcover
This book, and another by Ferris, was a required textbook for a class taught by the author (Ferris) at the school where he teaches. It is an indication of the respect that the other Finance and Accounting profs have for Prof Ferris that his books are used by no other profs there- in fact, many riducle the simple errors and theoretical mistakes that are present in this book. As a guide to valuation of public firms, this book is useful only in outlining a simplisitc cookie-cutter format that lacks any depth or analysis.
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Most Helpful Customer Reviews on Amazon.com (beta)
Amazon.com: 3.7 out of 5 stars  3 reviews
5 of 6 people found the following review helpful
4.0 out of 5 stars A Good Read! July 22 2005
By Rolf Dobelli - Published on Amazon.com
Format:Hardcover
The evidence is undeniable - most mergers fail and most acquisitions never achieve their promised synergies. Yet firms keep bidding top prices to acquire targets. Economists have a name for this phenomenon: the winner's curse. This theory says that the winner in any auction is apt to be the bidder who has most drastically overestimated the purchase's value. The winner, in this case, turns out to be a real loser. Authors Kenneth R. Ferris and Barbara S. Pecherot Petitt present compelling examples of companies that overpaid disastrously for acquisitions. They outline several approaches to valuation that might spare other companies from that sorry fate. We recommend this comprehensive and quite directly applicable book, which is full of cautionary notes and recommendations on how and when to use various valuation models. Why do companies continue to flirt with the winner's curse? The authors conclude, perhaps naively, that companies simply don't know how to correctly value their targets. Whatever the cause, there continue to be many cases where losing, rather than winning, would be a blessing to shareholders.
3 of 4 people found the following review helpful
5.0 out of 5 stars Insightful! July 27 2004
By Hossam Alsaady - Published on Amazon.com
Format:Hardcover
I took a course offered by Ken Ferris before the book was published, then read the material. It reminded me of a lot of the insights that I gained from the course. Good book for practitioners.
6 of 12 people found the following review helpful
2.0 out of 5 stars Met the man, taken his courses... July 1 2004
By A Customer - Published on Amazon.com
Format:Hardcover
This book, and another by Ferris, was a required textbook for a class taught by the author (Ferris) at the school where he teaches. It is an indication of the respect that the other Finance and Accounting profs have for Prof Ferris that his books are used by no other profs there- in fact, many riducle the simple errors and theoretical mistakes that are present in this book. As a guide to valuation of public firms, this book is useful only in outlining a simplisitc cookie-cutter format that lacks any depth or analysis.
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