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Case study: Kohler Co.

Case study: Kohler Co. . Private Company Valuation HBS Case. Methodology. Case summary Ratio Analysis Valuation: Income approach (DCF) Valuation: Market approach (Multiples) Discount for lack of control and marketability Valuation summary (intrinsic value per share). 2. Income approach.

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Case study: Kohler Co.

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    1. Case study: Kohler Co. Private Company Valuation HBS Case

    2. Methodology Case summary Valuation: Income approach (DCF) Valuation: Market approach (Multiples) Discount for lack of control and marketability Valuation summary (intrinsic value per share)

    5. 3. Market (multiples approach) Use the financial information in Exhibit 7b to compute the following three trading multiples for comparable companies: 1. Sales multiple= Total Enterprise value/ Sales Notes: Total Enterprise (firm) value = market value of equity+ total debt Enterprise value= Total enterprise value- cash

    7. 4. Discount for lack of control and marketability

    8. Control Premiums and Minority discounts Is it one share worth the same price to Herbert Kohler compared to any minority investors? Why? DCF approach yields a value per share on a control basis Multiples approach yields a value per share on a minority basis What discount to use for lack of control? Acquisition premium: 30% to 50% Voting premium: 5% to 15%

    9. Discounts for lack of marketability (or liquidity) Why liquidity is important? The discounts range from 15% to 35%

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