The valuation accuracy of multiples in mergers and acquisitions, and their association with firm misvaluation

This study explores the accuracy and valuation implications of the application of a comprehensive list of equity multiples in the takeover context. Motivating the study is the prevalent use of equity multiples in practice, the observed long-run underperformance of acquirers following takeovers, and the scarcity of multiplesbased research in the merger and acquisition setting. In exploring the application of equity multiples in this context three research questions are addressed: (1) how accurate are equity multiples (RQ1); which equity multiples are more accurate in valuing the firm (RQ2); and which equity multiples are associated with greater misvaluation of the firm (RQ3). Following a comprehensive review of the extant multiples-based literature it is hypothesised that the accuracy of multiples in estimating stock market prices in the takeover context will rank as follows (from best to worst): (1) forecasted earnings multiples, (2) multiples closer to bottom line earnings, (3) multiples based on Net Cash Flow from Operations (NCFO) and trading revenue. The relative inaccuracies in multiples are expected to flow through to equity misvaluation (as measured by the ratio of estimated market capitalisation to residual income value, or P/V). Accordingly, it is hypothesised that greater overvaluation will be exhibited for multiples based on Trading Revenue, NCFO, Book Value (BV) and earnings before interest, tax, depreciation and amortisation (EBITDA) versus multiples based on bottom line earnings; and that multiples based on Intrinsic Value will display the least overvaluation. The hypotheses are tested using a sample of 147 acquirers and 129 targets involved in Australian takeover transactions announced between 1990 and 2005. The results show that first, the majority of computed multiples examined exhibit valuation errors within 30 percent of stock market values. Second, and consistent with expectations, the results provide support for the superiority of multiples based on forecasted earnings in valuing targets and acquirers engaged in takeover transactions. Although a gradual improvement in estimating stock market values is not entirely evident when moving down the Income Statement, historical earnings multiples perform better than multiples based on Trading Revenue or NCFO. Third, while multiples based on forecasted earnings have the highest valuation accuracy they, along with Trading Revenue multiples for targets, produce the most overvalued valuations for acquirers and targets. Consistent with predictions, greater overvaluation is exhibited for multiples based on Trading Revenue for targets, and NCFO and EBITDA for both acquirers and targets. Finally, as expected, multiples based Intrinsic Value (along with BV) are associated with the least overvaluation. Given the widespread usage of valuation multiples in takeover contexts these findings offer a unique insight into their relative effectiveness. Importantly, the findings add to the growing body of valuation accuracy literature, especially within Australia, and should assist market participants to better understand the relative accuracy and misvaluation consequences of various equity multiples used in takeover documentation and assist them in subsequent investment decision making.

Measuring the effects of mergers and acquisitions on the economic performance of real estate developers

Real estate developers in China are using mergers and acquisitions (M&As) to ensure their survival and competitiveness. However, no suitable method is yet available to assess whether such M&As provide enhanced value for those involved. Using a hybrid method of data envelopment analysis (DEA) and Malmquist total factor productivity (TFP) indices, this paper evaluates the short and medium term effects of M&As on acquirers’ economic performance with a set of 32 M&A cases occurring during 2000–2011 in China. The results of the analysis show that M&As generally have a positive effect on acquirers’ economic performance. Acquisitions on average experienced a steady growth in developer Malmquist TFP, a more progressive adoption of technology immediately after acquisition, a slight short-term decrease in technical efficiency after acquisition but followed by a marked increase in the longer term once the integration and synergy benefits were realised. However, there is no evidence to show whether developers achieved any short or long term scale efficiency improvements after M&A. The findings of this study provide useful insights on developer M&A performance from an efficiency and productivity perspective.

Selected new training documents to update user profile

Relevance Feedback (RF) has been proven very effective for improving retrieval accuracy. Adaptive information filtering (AIF) technology has benefited from the improvements achieved in all the tasks involved over the last decades. A difficult problem in AIF has been how to update the system with new feedback efficiently and effectively. In current feedback methods, the updating processes focus on updating system parameters. In this paper, we developed a new approach, the Adaptive Relevance Features Discovery (ARFD). It automatically updates the system's knowledge based on a sliding window over positive and negative feedback to solve a nonmonotonic problem efficiently. Some of the new training documents will be selected using the knowledge that the system currently obtained. Then, specific features will be extracted from selected training documents. Different methods have been used to merge and revise the weights of features in a vector space. The new model is designed for Relevance Features Discovery (RFD), a pattern mining based approach, which uses negative relevance feedback to improve the quality of extracted features from positive feedback. Learning algorithms are also proposed to implement this approach on Reuters Corpus Volume 1 and TREC topics. Experiments show that the proposed approach can work efficiently and achieves the encouragement performance.

Towards an integrative framework for future research on small firm growth

Our review has demonstrated that small firm growth is a complex phenomenon. The concept ‘growth’ denotes both a change in amount and the process by which that change is attained. Further, the growth can be achieved in different ways and with varying degrees of regularity, and it manifests itself along several different dimensions such as sales, employment, and accumulation of assets. This complexity has naturally led researchers to adopt different approaches to studying growth and to use different measures to assess it. Further, although our review shows that it can fruitfully be regarded as a growth issue, the research on small firms' internationalization has largely developed as a separate stream. Similarly, other relatively separate literatures have evolved, which effectively focus on different modes of growth although mostly without regarding the studies first and foremost as growth studies. This goes for topics such as mergers and acquisitions, diversification, and integration - research streams which have largely ignored the particularities of small firms and which in turn have been largely ignored among researchers focusing on small firm growth.

Simplifying process model abstraction : techniques for generating model names

The increased adoption of business process management approaches, tools and practices, has led organizations to accumulate large collections of business process models. These collections can easily include hundred to thousand models, especially in the context of multinational corporations or as a result of organizational mergers and acquisitions. A concrete problem is thus how to maintain these large repositories in such a way that their complexity does not hamper their practical usefulness as a means to describe and communicate business operations. This paper proposes a technique to automatically infer suitable names for business process models and fragments thereof. This technique is useful for model abstraction scenarios, as for instance when user-specific views of a repository are required, or as part of a refactoring initiative aimed to simplify the repository’s complexity. The technique is grounded in an adaptation of the theory of meaning to the realm of business process models. We implemented the technique in a prototype tool and conducted an extensive evaluation using three process model collections from practice and a case study involving process modelers with different experience.

Study of the effect of M&A on real estate industry firms' performance

This paper proposes to adopt data envelopment analysis (DEA) based Malmquist total factor productivity (TFP) indices methods to evaluate the effect of mergers and acquisitions (M&As) on acquirers in short-term and long-term window. Based on analyzing 32 M&A deals conducted by Chinese real estate firms from 2000-2011, the study result demonstrate that the effect of M&A on developers’ performance is positive. Through M&A, the developers’ Malmquist TFP experienced a steady growth; their technology has got noticeable progress immediately after acquisition; and their technical efficiency has suffered a slight decrease in short-term after acquisition, but then achieved marked increase in the long-term when realization of integration and synergy. However, there is no evidence that the real estate firms have achieved scale efficiency improvement after M&A in either short-term or long-term.

Competition Law in Australia [6th ed.]

Competition Law in Australia, 6th edition provides a comprehensive discussion of the provisions of the Competition and Consumer Act 2010 (Cth) (CCA) dealing with the regulation of competition and markets in Australia. This book covers disparate topics, such as restrictions in horizontal and vertical agreements, horizontal mergers and acquisitions, misuse of market power, and access to services necessary to compete in upstream or downstream markets. However, the unifying theme of this text is that it is not possible to use a formalistic approach in applying the CCA. The decisions of the courts, and the competition authorities responsible for implementing and enforcing the CCA, underline the need to undertake a detailed substantive economic analysis of the effect of the agreement or conduct at issue on competition, efficiency and consumer welfare.

The AOL Huffington Post merger

This article examines the merger between AOL and the Huffington Post. The broader issues around the merger will be investigated, especially the implication for rights, in particular free expression, and their conditions for exercise and actual exercise online. One major issue is that of the status of user-generated content and how the existing legal regime reflects the ethical concerns of users over how their content, data and information is used and commodified by the for-profit Internet intermediaries and platforms, especially when they start to merge and form concentrations. The extent to which the current legal regimes, especially human rights, deal with these problems in an adequate fashion will be assessed, along with the presentation of some suggestions of alternative approaches which may be more effective in practice.

Access to East European and Eurasian culture : publishing, acquisitions, digitization, metadata

Review of the book 'Access to East European and Eurasian culture: publishing, acquisitions, digitization, metadata', edited by Miranda Remnek, published by Haworth Information Press, 2009.

Beat-mixing Rock music: Rock and electronic dance music merge to create the Manarays

This research introduces the proposition that Electronic Dance Music’s beat-mixing function could be implemented to create immediacy in other musical genres. The inclusion of rhythmic sections at the beginning and end of each musical work created a ‘DJ friendly’ environment. The term used in this thesis to refer to the application of beat-mixing in Rock music is ‘ClubRock’. Collaboration between a number of DJs and Rock music professionals applied the process of beat-mixing to blend Rock tracks to produce a continuous ClubRock set. The DJ technique of beat-mixing Rock music transformed static renditions into a fluid creative work. The hybridisation of the two genres, EDM and Rock, resulted in a contribution to Rock music compositional approaches and the production of a unique Rock album; Manarays—Get Lucky.

Property development cycle and acquisition strategies

This presenation is part of the UDIA (Qld) Property Development Essentials program, which is a two-day introductory course designed for new entrants to the property industry. The course provides practical advice and direction for those looking to take the first steps into the development industry. This presentation identifies economic factors and their influence on land acquisitions, as well as providing an understanding the property development and business cycles and their impacts on acquisition strategies (long v. short term projects)

Empathy, neutrality and emotional intelligence: a balancing act for the emotional Einstein

Emotions play a central role in mediation as they help to define the scope and direction of a conflict. When a party to mediation expresses (and hence entrusts) their emotions to those present in a mediation, a mediator must do more than simply listen - they must attend to these emotions. Mediator empathy is an essential skill for communicating to a party that their feelings have been heard and understood, but it can lead mediators into trouble. Whilst there might exist a theoretical divide between the notions of empathy and sympathy, the very best characteristics of mediators (caring and compassionate nature) may see empathy and sympathy merge - resulting in challenges to mediator neutrality. This article first outlines the semantic difference between empathy and sympathy and the role that intrapsychic conflict can play in the convergence of these behavioural phenomena. It then defines emotional intelligence in the context of a mediation, suggesting that only the most emotionally intelligent mediators are able to emotionally connect with the parties, but maintain an impression of impartiality – the quality of remaining ‘attached yet detached’ to the process. It is argued that these emotionally intelligent mediators have the common qualities of strong self-awareness and emotional self-regulation.