Valuation: Measuring and Managing the Value of Companies, 5th Edition (Wiley Finance) [Hardcover]

McKinsey & Company Inc. (Author), Tim Koller (Author), Marc Goedhart (Author), David Wessels (Author)

Book Description

Publication Date: July 26, 2010 | ISBN-10: 0470424656 | ISBN-13: 978-0470424650 | Edition: 5

The number one guide to corporate valuation is back and better than ever

Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fifth Edition continues the tradition of its bestselling predecessors by providing up-to-date insights and practical advice on how to create, manage, and measure the value of an organization.

Along with all new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect new developments in corporate finance, changes in accounting rules, and an enhanced global perspective. Valuation, Fifth Edition is filled with expert guidance that managers at all levels, investors, and students can use to enhance their understanding of this important discipline.

• Contains strategies for multi-business valuation and valuation for corporate restructuring, mergers, and acquisitions
• Addresses how you can interpret the results of a valuation in light of a company's competitive situation
• Also available: a book plus CD-ROM package (978-0-470-42469-8) as well as a stand-alone CD-ROM (978-0-470-42457-7) containing an interactive valuation DCF model

Valuation, Fifth Edition stands alone in this field with its reputation of quality and consistency. If you want to hone your valuation skills today and improve them for years to come, look no further than this book.

Editorial Reviews

Amazon.com Review

More to Explore: See More Valuation Resources

Title Investment Valuation Investment Valuation Valuation Equity Asset Valuation Tools and Techniques for Determining the Value of Any Asset Tools and Techniques for Determining the Value of any Asset Measuring and Managing the Value of Companies     Guide Type Professional Text Professional Text   Audience Level Professional Graduate Student Professional Professional and Student   Pages 992 992 811 464   Binding Hardcover Paperback Hardcover Hardcover   List Price $125.00 $95.00 $95.00 $95.00   Author(s) Damodaran Damodaran McKinsey & Company / Koller CFA / Pinto   Publication Date April, 2012 April, 2012 July, 2010 February, 2010   Imprint Wiley Wiley Wiley Wiley   Print Book 111801152X 1118130731 0470424656 0470571438   Kindle Book B007MF15VE B007MF15ZA B003YJF068 B0034DGPO0   Edition 3 3 5 2   Brief Description Comprehensive book by a leading voice in valuation and one of the nation's top business school professors. Comprehensive book by a leading voice in valuation and one of the nation's top business school professors. Best-selling guide to corporate valuation. Comprehensive approach to standard and advanced topics. Offers vital insights on equity valuation; has a separate companion workbook for practicing key concepts.

From the Inside Flap

Corporate finance is simpler and more intuitive than most people think. Yet, executives frequently make decisions that defy the core principles and their own intuition. They subscribe to the common wisdom of "The Street" instead of simple, common financial sense.

McKinsey's Valuation: Measuring and Managing the Value of Companies, Fifth Edition, provides the knowledge executives need to make value-creating decisions—replacing some of the myths that pervade the corporate world with proven principles of value creation.

Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fifth Edition provides up-to-date insights and practical advice on how to create, manage, and measure the value of an organization. Along with all new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect the events of the real estate bubble and its effect on stock markets, new developments in corporate finance, changes in accounting rules, and an enhanced global perspective.

Valuation, Fifth Edition is filled with expert guidance that managers at all levels, investors, and students have come to trust. It contains a solid framework for valuation:

• Analyzing historical performance, including reorganizing a company's financial statements to reflect economic rather than accounting performance
• Forecasting performance, with emphasis on not just the mechanics of forecasting but also how to think about a company's future economics
• Estimating the cost of capital with practical tips that aren't found in textbooks
• Interpreting the results of a valuation in light of a company's competitive situation
• Linking a company's valuation multiples to the core drivers of its performance

Hailed by financial professionals worldwide as the single best guide of its kind, Valuation, Fifth Edition remains true to its roots, with an extensive discussion on the complexity of measuring corporate performance to assess historical financial results properly and to gain insight into a company's ability to create value in the future (its corporate "health").

At the crossroads of corporate strategy and finance lies valuation. Filled with expert guidance and reliable advice, Valuation, Fifth Edition enables everyone from the budding professional to the seasoned manager to excel at measuring, managing, and maximizing shareholder and company value.

See all Editorial Reviews

Product Details

• Hardcover: 840 pages
• Publisher: Wiley; 5 edition (July 26, 2010)
• Language: English
• ISBN-10: 0470424656
• ISBN-13: 978-0470424650
• Product Dimensions: 7.6 x 1.8 x 10.3 inches
• Shipping Weight: 3.5 pounds (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (20 customer reviews)
• Amazon Best Sellers Rank: #8,544 in Books (See Top 100 in Books)
  • #44 in Books > Business & Investing > Finance

More About the Author

Tim Koller is a partner in McKinsey's New York office. Tim has served clients in North America and Europe on corporate strategy and issues concerning capital markets, M&A transactions, and value-based management. He leads the firm's research activities in valuation and capital markets issues. He received his MBA from the University of Chicago.

Most Helpful Customer Reviews

118 of 120 people found the following review helpful

5.0 out of 5 stars The best got better November 10, 2010

By Aaron C. Brown TOP 500 REVIEWERVINE™ VOICE

Format:Hardcover

I have to begin with a gripe. The first four reviews are implausibly quick, given the length of this book, and are all five-star. Three are from people who reviewed only one product, one is completely devioid of content. The fifth reviewer has reviewed one other product, a razor. I understand the temptation to stuff the ballot-box early by having friends review, but I think you should find real reviewers and insist on some content.

There are several great valuation books out there. Damodaran on Valuation concentrates on security valuation and is the most academic. Business Valuation is the best for small, private companies. Business Valuation on Wall Street tells you how Wall Street approaches the question. Theory of Valuation is the best on theory. Corporate Finance has the best treatment of valuation among corporate finance texts.

Earlier editions of this book were the clear leaders in big and complex public company valuation. There is extensive and detailed instruction for a big team analyzing for a big project, whether it is capital budgeting, capital structure, merger, acquisition, restructuring, bankruptcy or any other valuation topic. It is comprehensive and clear. If you work on this kind of project, you need this book.... If you don't work on this kind of project, it can still give you a tremendous amount of insight into the factors that contribute to shareholder value.

The most important improvement in the fifth edition is to go beyond the developed-markets/US-style financial statement presentation to cover emerging market companies in detail. I can't say whether the section is good as I have zero experience in that area, but it sounds right and I trust the authors. The treatment of capital structure and investor relations is considerably improved based on events of the last three years. They also stuck in some useless fluff about the necessity to maximize shareholder value and behavioral finance (I don't mean those aren't interesting areas, just that there's no depth to the presentation in this book, and clearly no real interest by the authors).

One minor gripe is the examples are usually placed around the beginning of 2008, for a book published in 2010. That's a big difference considering what happened in 2008 and 2009. I understand why you don't want to rework every example of a book this big, but some of the projections are downright comical to someone knowing what actually happened. I suppose that might help readers develop humility, at the end of the day, valuation is a matter of opinion based on highly uncertain information about totally unknowable future events. The weight and slick production values of tihs book might cause some to forget that. Read more ›

17 of 19 people found the following review helpful

5.0 out of 5 stars A fantastic book sans the technicalities August 27, 2010

By Kaushik Desarkar

Format:Hardcover

I have the 4th edition and it is a fantastic book especially when you are trying to get the grips on valuation, more so when you are not coming from a "pure" accounting background. Chapters 5 (6 in the new edition) onwards till 12 really take you step by step through the intricacies - a top-down approach. However, I will suggest Penman's Financial Statement Analysis & Security Valuation - Part 2 where the FSA detailed is really great - getting the FCF in 2 steps instead of the traditional 7+ steps, to be read in conjunction with this book. Rosenbaum's Investment Banking is good for developing the eye-catching spreadsheet models.

17 of 20 people found the following review helpful

5.0 out of 5 stars Great book for the seasoned professional and aspiring practitioner September 24, 2010

By Joshua D. Pearl

Format:Hardcover

As the coauthor of Investment Banking, also a Wiley Finance book, I received a complimentary copy of the 5th edition of McKinsey's Valuation book. While I own the previous editions and workbooks, the new edition is greatly expanded including practical case studies as well as interesting insight into complex valuation nuances such as real options. I highly recommend this book for anyone looking to advance their valuation skill set and general corporate finance knowledge.

7 of 8 people found the following review helpful

4.0 out of 5 stars From the clear basics do the experts October 20, 2010

By Guilherme.CS

Format:Hardcover|Amazon Verified Purchase

I've just received the book in Brazil, and, had read the previous edition before, I can tell so far that the current one incorporated the good things and organized it in a more practical way. The book content itself is very useful for BA students and finance professionals. It demystifies and makes very clear what is the so-called "value creation" and how to make it happen. A must-have book for those who work with M&A and IR.

1 of 1 people found the following review helpful

5.0 out of 5 stars A handbook that is used by practitioners January 12, 2013

By eqtbooks

Format:Hardcover

On a basic level there are two competing mental models of stock values in the financial sector. The first is that the value of something is what someone is prepared to pay for that something. In the equity market this leads to statements such as "the valuation of a stock is low" if the current market pricing of the stock is historically low compared to, for example, the estimate of the near term future earnings. The other model is based on that a company has a fundamental intrinsic value that is separate from the market pricing of its equity. This book is about both how to estimate this intrinsic value and also on how to create it.

Out of all the books reviewed on this website Valuation is probably the one that sits on most shelves behind workstations of employees in the financial sector. The reason is that most of us have had it as a text book at university, but compared to all the other text books this one is also a handbook in corporate valuation that is used by practitioners. For those who use the concept of intrinsic value, cash flow valuation has become the standard methodology and Valuation is the standard source material. The book is mandatory reading for persons within corporate finance, venture capital and private equity who are slightly less close to the public stock market. It is less widely used by portfolio managers or sell side analysts who often look to shorter time horizons.

There are obviously competing text books on valuation such as Damodaran on Valuation. Where professor Aswath Damodaran's writing is academic and covers more ground with regards to different aspects of securities valuation, Valuation is a practical book that connects valuation to corporate strategy and value based management.... Two of the he authors of Valuation are employed by McKinsey and the main focus is on one specific method of valuation. This is a fifth edition. Over the years this book has become more and more of a practitioner's manual with consistent form, new sections on special situations and sector issues plus solutions to all kinds of practical problems in a DFC-valuation. More academic issues such as if CAPM is really a good model to use for estimating the WACC, when it has become more and more obvious that beta doesn't work, is toned down as this would only subtract from the practical value of the book. Damodaran on Valuation is written by an academic, Valuation is written by consultants for daily use by CEOs and finance professionals.

The intrinsic value in a DCF is based on cash flows, the growth in cash flows and the risk that these future cash flows will not materialize. The cash flow in question differs; it might be dividends for stocks, coupons for bonds or after tax cash flows for businesses. The problem is that as the future is unknown the intrinsic value is unobservable. Any calculation of it is an act of faith. One strength of the DCF is that it is transparent. It requires a large number of assumptions of future performance. Each such input has a range of reasonable values and the choice of inputs can be examined and criticized. Paradoxically the construction also opens up for psychological biases. If each and one of the many inputs are tweaked in a slightly more optimistic or pessimistic direction the multiplier effect of all those small (but one by one reasonable) changes will bring huge swings in the calculated intrinsic value. The fact that a DCF could be made to show almost anything has created a mini revival for excess return valuations such as the Residual Income Model. These are close cousins to the DCF methodology, but use a) the capital base of the company and b) its ability to earn a return on capital that is higher than the cost of capital as the two main inputs. Using the capital as the base for the valuation makes it potentially less dependent on estimates of an unknowable future.

This book is unbeatable for the practitioner who needs the tools for valuing a company or must understand how other do just that. More philosophical issues are to be sought elsewhere.

This is a review by eqtbooks.com Read more ›