Appeal 2007-2745
Application 09/761,671
1 more drivers may have to be varied in concert to produce the best results
2 (Bielinski, 1:Abstract).
3 06. Bielinski describes Value-Based Management (VBM), which keys on
4 a target's historical operations rather than future projections. VBM also
5 can calculate the results of trade-offs when decision makers must choose
6 between a series of factors that can be changed to enhance post
7 acquisition value (Bielinski, 1:Bottom ¶ - 2:Top line).
8 07. Bielinski describes the best-known valuation tool designed to
9 facilitate value creation and cash flow enhancement as Shareholder
10 Value Analysis (SVA), introduced in the 1980s by Prof. Alfred
11 Rappaport of Northwestern University (Bielinski, 2:First full ¶).
12 08. SVA may be defined as a two-step process. First, a discounted cash
13 flow business valuation is performed. A projection of future cash flow
14 (including a residual) is developed and discounted at an appropriate rate,
15 usually the cost of capital, to arrive at an indicated value. Second, key
16 factors (or value drivers), such as growth, profit margins, etc., are varied
17 systematically to test the sensitivity of the indicated business value to
18 each driver. Standard SVA sensitivity analysis changes each value driver
19 plus or minus 1%, although analysts now often use "relevant ranges" and
20 different percentages for upside and downside swings to reflect
21 prevailing business realities (Bielinski, 2:First full ¶).
22 09. SVA has limitations often magnified into constraints that necessitate
23 modifying standard SVA analysis. Thus, Rappaport describes and
24 distinguishes VBM, a first cousin to SVA, which has resulted from these
25 modifications. Bielinski provides an abbreviated overview of VBM and
6
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: September 9, 2013