One Hedge Fund Manager trading public whom I highly respect told me Private Equity would prefer Free Cash Flow because PE funds exert more control over the business and financial of the business.
For the PE deals I’ve done I have used models not in the CFA, nor Damodaran, nor Bodie Kane Marcus, nor Fama French, nor Palepu. I went back to the core business model and devise valuations based on its value chain.
Which made sense to the buyout investors I’ve been working with.
Financial investors would rely on FCF though and I agree by all means they should.
Regardless of backstage financial modelling and quant, negotiations are done on multiples. In fact, multiples do not ONLY look at profitability but also embed implied information on risk and growth. I always assumed all analysts understood that but my presumption was proven wrong time to time.
Oh, and about Venture Capital. Mostly multiples on the cloud.
I’ve been working on both industry and academic and, despite what street smarts think of the ivory tower, academic models are not naïve. It’s how one tailors and adjusts it to reflect one’s investment thesis.
Being proficient with many peer reviewed and proven valuation models then building models for one’s own from scratch should be the minimum requirement for junior equity analysts.
Rocket Internet (công ty đầu tư Lazada, Zalora) làm tiền hay kinh điển
Chi phí để bán được hàng gấp 3 lần doanh thu từ các công ty liên kết.
Bản chất entity Rocket Internet không phải công ty công nghệ mà là công ty đầu tư (giống Kinh Đô). Không book doanh thu từ công ty liên kết vào Operating Revenue mà book vào Financial Revenue.
Kết quả là âm ngay từ Gross Margin, thả cho Net Margin vừa hoà vốn. Tính toán Deferred Tax ngon lành.
Đang cầm số tiền mặt cao gần gấp 20 lần số lỗ trước thuế, chắc là để xoay vòng, xoay vòng. Số tiền mặt bằng 112% tổng giá trị đã đầu tư, kỹ tính quá.
Mọt sách tí thì dùng Residual Earnings chứ đừng lấy Free Cash Flow.
Lâu lâu academic với investment banker mới gặp nhau ở định nghĩa này: risk is uncertainty of outcome. Theo định nghĩa này, Rocket Internet KHÔNG hề rủi ro. Hãy yên tâm tăng trưởng.
Click here to read the criticism thrown toward Eric Schmidt, CEO of Google.
This story is a good case study we can take to look into horizontal corporate communication.
In many companies, conflicts usually arise between “cold-hearted” business decision makers and “burning-with-enthusiasm” inventors.
Business decision makers are usually criticized by more technical-oriented co-workers that the first group is usually so ruthless.
The truth is a company needs different balancing forces to keep going forward. Products stemmed from ideas are crucial to any firm, but the firm also needs to make profit.
The story I cited is good in a way that: it shows the flaming pressure (in this case, public criticism of a stakeholder toward CEO) under which leaders face, something leaders often choose to communicate with their subordinates in more pleasant ways.
So what’s the moral?
1. The blue time of recession is a good excuse for people to come together and elicit more empathy.
2. Hard-skill oriented workers can choose to be more politics-savvy, and know more of how organizations operate.
3. Leaders can choose to be more direct and open, even in darkest times. Daniel Roth’s success story is a good example.
Good luck everyone.
for Sam, Noa, Suzanne, Marie and Devina
I’m quite surprised personal growth of users seems to be underrated in discussions, if any, on Vietnamese web services.
Thoughts on personal growth answer the question “What to do with users as they grow”.
There are different aspects in the growth of a person.
A person grows up over time and be more mature. As they grow mature, these may change:
- Buying power
- Defense against advertisements
A high school student can find part-time job. A college student becomes a professional after graduation.
Young users don’t remain young forever.
There will be new generations.
Case study: Facebook. Many first Facebook users from Ivy then became professionals and they continue to invite their colleagues to use the service. Facebook grew to satisfy college students, working people and then high school students as well.
Users will be more adept in their technology knowledge and skills over time. Here is one example.
Users will be more proficient in command of foreign language(s).
As a person grows, her relationship changes: single to in a relationship then married then expected then with children.
Their procurement needs, time and attention change accordingly.
Briefly, what to do with it
- Consider this in any product plan and business model
- Does your product satisfy users from different ranges of age? Do you want your product to?
- Offer your products in integrated packages. Establish partnership and outsource