Asian Development Outlook 2000
, Asian Development Bank and Oxford University Press, p. 32.The authors acknowledge the contributions of Cuong Do, Keiko Honda, Takeshi Ishiga, Jean-Marc Poullet,and Duncan Woods to this article.
is an alumnus of McKinsey’s New York office, where
is a principal. Copyright© 2000 McKinsey & Company. All rights reserved. This article is adapted from Tom Copeland, TimKoller, and Jack Murrin,
Valuation: Measuring and Managing the Value of Companies
, third edition,New York: John Wiley & Sons, 2000, available at www.wileyvaluation.com.
s the economies of the world globalize
and capital becomes moremobile, valuation is gaining importance in emerging markets—forprivatization, joint ventures, mergers and acquisitions, restructuring, andjust for the basic task of running businesses to create value. Yet valuation ismuch more difficult in these environments because buyers and sellers facegreater risks and obstacles than they do in developed markets.In recent years, nowhere have those risks and obstacles been more seriousthan in the emerging markets of East Asia. The Asian ﬁnancial crisis, whichbegan in August 1997, weakened a mass of companies and banks and led toa surge in M&A activity, giving valuation practitioners a good chance totest their skills. In Indonesia, Malaysia, the Philippines, South Korea, andThailand—the hardest-hit Asian economies—cross-border majority-ownedM&A reached an annual average value of $12 billion in both 1998 and 1999,compared with $1 billion annually from 1994 to 1996.
Mimi James and Timothy M. Koller
Procedures for estimating a company’s future cash ﬂows discounted ata rate that reﬂects risk are the same everywhere. But in emerging markets,the risks are much greater.
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