Valuing a Technology Company

Course Overview:

This course is ideal for those who are dealing with technology companies and need to gain an appreciation of their worth.

It focuses on the different techniques that can be deployed in assessing these companies, especially the real options approach which has achieved a wide degree of popularity.

The course is also useful to those who are involved in any type of corporate transaction for technology companies from an advisory perspective.

Participants should be familiar with discounted cashflow techniques and have at least a basic understanding of business valuations.

Participants will be required to bring a laptop with a CD-Rom or USB connection to the course.

Course Content:

Defining the Problems

• Differences between traditional corporate valuation and technology valuation
• Handling data problems that emerge with technology companies
• Lifecycles and corporate cashflows
• Review of DCF valuation techniques and applications to technology businesses
• Valuing early stage development businesses

Applying the DCF Model to Technology Companies

• Estimating cashflows and expenditure patterns
• Evaluating the expected growth rate
• Links to corporate strategic models
• Combining growth rate with investment intensity and return on investment
• Applying the appropriate discount rate and varying the rate over time
• Evaluating the stable growth stage and calculating the terminal value
• Inherent problems of using the DCF model to value technology companies

Using Multiples in Technology Valuation

• Importance of using EBITDA if possible
• Using revenue multiples
• Examining the broad range of possible comparisons
• Using statistical analysis to improve the multiple comparison
• Pitfalls in using multiple approach for technology companies

Using the Real Options Approach

• The problems inherent in using the NPV/DCF approach to valuation
• Defining real options – patent rights, expansion option, abandonment option
• Why real options are more applicable to technology companies
• Basics of real option valuation using binomial trees and a lattice approach
• Financial option pricing (Black Scholes) and the link to real options
• Management options and the value of strategic flexibility
• Using real options approach to improve the understanding of technology valuations

What our clients are saying about the course

“Covers price vs value”

“A proactive course – helped challenge traditional methods & point out common errors”

“Good discussions regarding the implications of difference techniques”