Dr. Stefan Stöckl
International company valuation
In the course of globalization, international company valuations or company valuations in an international context have gained considerably in importance.
In this context, international company valuation refers to the valuation of entire companies or company shares with special consideration of foreign markets. Typical occasions for an international company valuation are among others:
Purchase or sale of companies abroad
Cross-border formation of joint ventures
Expansion / contraction / liquidation of an investment abroad
Purchase Price Allocation (PPA)
Basically, in the context of an international company valuation, especially on frontier markets and emerging markets, far more risks have to be considered compared to company valuations on developed markets. Depending on the market risk, a distinction can be made between developed markets (low to very low market risk), emerging markets (medium market risk) and frontier markets (very high market risk).
Risks include country and transfer risks among others. Furthermore, special features of international company valuations lie in international accounting (e.g. IFRS or US-GAAP), international taxation or currency differences and exchange rate fluctuations.
In addition to common valuation methods such as the Capital Asset Pricing Model (CAPM), special approaches such as the global (GCAPM), (traditional) local or international CAPM (ICAPM), the Godfrey Espinosa model, the Goldman Sachs model, the Damodaran model and the Salomon Smith Barney model as well as non-CAPM-based models are used in international valuation.
The global CAPM (GCAPM) includes the global market risk premium as the only risk factor, and the international CAPM (ICAPM) includes an asset-weighted foreign currency index as an additional risk factor. The other methods listed are so-called hybrid CAPM models. In practice, the CAPM-based methods are preferred to the non-CAPM-based models due to the simpler data procurement, as the CAPM typically has a wider distribution.
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