Earlier this spring, I interned with KPMG on their business valuations team. This team focuses on the intangible assets and overall value of a company. There is another team that focuses on the tangible assets of the company. These teams work closely together. There are many reasons for a company to be valued - tax reporting purposes, restructuring (including mergers and acquisitions), audit assist, and litigation support. I had the opportunity to work on three major projects for three separate clients during my time with KPMG. Each project was a unique learning experience. The first project I had the opportunity to work on was writing a report over a valuation for a large company. A report is meant to explain to the client what methodology
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I was heavily involved in building the model for a client. I had a basic understanding of the calculations necessary from my previous projects. This was a chance to apply what I had learned and an opportunity to delve more into the specifics of the calculations. This was not a complex model per say, but it had a lot of information built into it. We were performing a valuation of two reporting units under the management of the client, one was in the United States, the other in Canada. Regarding the reporting unit in Canada, I had to ensure all of their financial statements were converted from CAD to USD. We also had to consider the lack of revenue from this reporting unit as it was not operational yet. To quell this issue, the company provided its best estimates of the projected revenue from this reporting unit. In regards to the reporting unit located here in the United States, we had to consider fire reconstruction costs and its effects on revenues and expenses. The company was able to provide us with the expenses directly related to the fire reconstruction so that we would be able to exclude this from consideration. For both reporting units, we had to determine an appropriate value for net working capital as a percent of revenue and build a tax depreciation schedule, among other …show more content…
This is used most frequently at KPMG because this approach is, as its name suggests, for reporting units with income producing assets. As one can imagine, KPMG performs valuations for several oil companies. An oil rig is a perfect example of an income producing asset. A value is achieved through the income approach by setting up a discounted cash flow. Previous and projected net operating incomes for typically twenty years out from the valuation date are discounted at the weighted average cost of capital to arrive at a market value. The weighted average cost of capital is determined by the following
I was heavily involved in building the model for a client. I had a basic understanding of the calculations necessary from my previous projects. This was a chance to apply what I had learned and an opportunity to delve more into the specifics of the calculations. This was not a complex model per say, but it had a lot of information built into it. We were performing a valuation of two reporting units under the management of the client, one was in the United States, the other in Canada. Regarding the reporting unit in Canada, I had to ensure all of their financial statements were converted from CAD to USD. We also had to consider the lack of revenue from this reporting unit as it was not operational yet. To quell this issue, the company provided its best estimates of the projected revenue from this reporting unit. In regards to the reporting unit located here in the United States, we had to consider fire reconstruction costs and its effects on revenues and expenses. The company was able to provide us with the expenses directly related to the fire reconstruction so that we would be able to exclude this from consideration. For both reporting units, we had to determine an appropriate value for net working capital as a percent of revenue and build a tax depreciation schedule, among other …show more content…
This is used most frequently at KPMG because this approach is, as its name suggests, for reporting units with income producing assets. As one can imagine, KPMG performs valuations for several oil companies. An oil rig is a perfect example of an income producing asset. A value is achieved through the income approach by setting up a discounted cash flow. Previous and projected net operating incomes for typically twenty years out from the valuation date are discounted at the weighted average cost of capital to arrive at a market value. The weighted average cost of capital is determined by the following