1. Introduction to Valuation of Foreign Firms/Projects International Finance: II Dick Sweeney

2. Foreign Valuation Different from valuation of domestic firm (or project) for M&A purposes Standard valuation problem for domestic M&A One firm to take over another completely, or starts a wholly owned project/subsidiary Only need to look at total value of target/project Acquiring firm gets all the cash flows

3. Foreign Valuation (cont.) Very different for foreign company/project Usually have equity partners Typical to have host-country partner, often required Usually have multiple sources of debt financing Finding best equity and debt partners is art of project financing Examples: International Finance Corp. of World Bank; U.S. Ex-Im Bank or OPIC

4. Foreign Valuation (cont.) Need to value company/project as a whole Use Free Cash Flow approach Like finding out the “size of the pie” Also need to value the cash flows going to each partner in project Use discounted cash flow approaches comparable to FCF approach What “slice” does each partner get? Each partner has to be “happy” for success

5. PPP and Real Exchange Rate Discuss PPP, but focus on use for valuation Means focus on real exchange rate In foreign valuations, real exchange rate is a key Real rate’s effects are often hidden Often ignored, but still there, still a key Bring it out in the open Not hard if done right Helps you be in charge of foreign valuation

6. Robin Cases Short cases, like programmed learning Completely re-written to be clearer, more transparent, more complete Set in Indonesia Prepare you for Vick and Corning Indonesia cases Look at pro formas in Rupiahs, in USD, in real USD Go behind typical international pro formas

7. Vick and Corning cases Classic cases about developing countries, especially Indonesia Not written as valuation cases In some ways, all the better Makes them more demanding, you learn more Do not worry—I am there to help you with the major issues, and with the tricky hurdles Lots of handouts to help with solutions

8. Case discussions, presentations The Robin cases have questions for discussion, and they really are for discussion, not for case presentation in class The Vick and Corning cases lend themselves to case presentations Really four cases Two on total value Two on value to single claimant