I just read three recent articles on EBITDA.


  1. https://www.toptal.com/finance/financial-analysts/ebitda?utm_source=linkedin&utm_medium=HBR&utm_campaign=EBITDA


2. https://www.toptal.com/finance/financial-analysts/ebitda?utm_source=linkedin&utm_medium=HBR&utm_campaign=EBITDA


3. https://www.forbes.com/sites/brentbeshore/2014/11/13/ebitda-is-bs-earnings/#33e54b1d6070

Quite interesting to see how EBITDA got challenged though it is used widely in the valuation. EBITDA so far is still seen as a clean measure of what the business has generated, separate from its capital or financing structure and investment. Since we are more interested in the risk of the company’s underlying business operations, then EBITDA seems to me, is relevant to use.


Comments from Ignacio Velez-Pareja:

You might guess what I think of EBITDA.

First of all, I prefer to show THREE financial statements: CB, P&L and BS.

When you do that, you have the best shortcut to CF: CCF = CFD+CFE and these two are seen directly in the CB as the negative of the financing module (3) and the equity transactions module (4). That’s it.

I think that valuation by multiples is still a questionable.

I do calculate multiples just to compare the calculated value with real transactions, not the contrary. I mean, multiple calculation should be done AFTER, valuation (DCF) in order to be compared with similar transactions. I just remember one firm that approached us saying that they were offered to buy the firm by 7 x EBITDA and asked if we could give an opinion on that. We said we had NFI if it was good or not to sell it to the English firm that made the offer. We explained the idea of DCF and that after that we could give our opinion. In short, we valuated the firm, we were very critical and conservative to any input to be included, such as real growth rates and real price increases and we found that EV/EBITDA might range between 12-17. After a couple of years I met the owners and they told me they didn’t accept the offer and that our estimate of multiple was still conservative. They were very happy with their decision not to sell.

Regarding the terminal value, TV, yes, it might be a Pandora’s Box. We usually have 3 estimates for TV: Invested Capital at year N, non-growing perpetuity and growing perpetuity. We try that PV(TV) is around 20%-30% of EV.

Bottom line: I stick to DCF.

Best regards

Note from Karnen: DCF is of course, the most “technical” analysis, compared to the other techniques in the Valuation for M&A, they are Comps and Precedent Transactions. However, the necessity to use Perpetuity in the DCF analysis is still quite problematic as it could take as much as 80% of the Enterprise Value analysis.

IPO Valuation – A Quick Communication with Prof. Peter M. DeMarzo (Stanford Graduate School of Business, USA)

Hi Prof. Peter,

I am referring to the 4th Edition of the Corporate Finance textbook (https://www.amazon.com/Corporate-Finance-4th-Pearson-Standalone/dp/013408327X),

Chapter 23 under 23.2 “The Initial Public Offering”, section “valuation” which said:

Before the offer price is set, the underwriters work closely with the company to come up with a price range that they believe provides a reasonable valuation for the firm using the techniques described in Chapter 9. As we pointed out in that chapter, there are two ways to value a company: estimate the future cash flows and compute the present value, or estimate the value by examining comparable companies. Most underwriters use both techniques. However, when these techniques give substantially different answers, they often rely on comparables based on recent IPOs.

However, when looking into Chapter 9, I do not find any mention about pre-money and post-money valuation.

Normally, for IPO purposes, since the company is going to issue new shares to be offered to the public, instead of the existing shareholders selling their shares to the public (Note: they could do so, post IPO, and there could be a lock-up period, let’s say, one year in certain country, for existing shareholder to be not being able to sell their shares), it is important to see how much the value of the company before and after the IPO proceeds flowing into the company’s bank account. The planned use of the IPO proceeds will be required to be disclosed in the prospectus and this will impact the IPO valuation, as the analyst needs to assess how much the added value of that use to the whole valuation.


The reply from Prof. Peter

Hi Karnen,

Yes, it is a good point worth mentioning that the value will be based on the anticipated future cash flows given any new investment.  (Alternatively, the new cash raised will contribute to the equity value over and above existing enterprise value.)

Thanks again,



Karnen’s responses:

Hi Prof. Peter,

This IPO valuation (or pricing in reality in view of limited number of shares being put on offer for sales to the public, resulting in the working of demand and supply law) is really interesting, though I see the Corporate Finance textbook is quite little in bringing to really appreciate it.

This IPO pricing is essentially about what the company would like to do with the IPO proceeds.

In general, we could separate the use of that IPO proceeds into:

  1. Financing a project/business totally separated from the company’s existing projects/business.
  2. Financing/refinancing current business, for example, the expansion in the same business line (opening more stores, financing working capital, capital expenditures), and/or paying down the bank loans
  3. The combination of No. 1 and No. 2 above.

In the case of No. 1 above, and assuming there is no positive/negative synergy with the current business/project, then the IPO pricing will really look into the added value (=NPV) of that new ventures divided by the number of newly issued shares.

In the case of No. 2 above, then we need to look at the equity value after being added with the NPV brought in by the expansion, etc., after factored into the valuation, the plus and minus of the synergy value. As a note, the NPV of the project will ultimately go to the equity shareholders or investors (Note: NPV project = NPV investors only holds if market value of the debt is identical to book value of the debt. If the debt is traded one, such as bonds, then this could not hold). Then the IPO pricing is the new equity value divided by the total number of common shares (current shares + new shares).

Jakarta, August 2017



I have made 5 videos showing the consistent formulas that we need to use for Tax Shield discount rate, Ke (Cost of Levered Equity), which will give us the same computed value result.

In those videos, I use the assumption of TS discount rate being discounted at Ku (Cost of Unlevered Equity).

In a nutshell, we need to be consistent in which formulas to use..otherwise, the resulted value will not be the same…trust me!

Kd that should be used in the WACC for CCF Kd WITHOUT (1-Tax). Once we apply this, it is so easy to see that the WACC is now Ku….. This is why Ignacio Velez-Pareja (the co-author of the Principles of Cash Flows Valuation book) kept saying that the simplest thing to do the valuation if we don’t have much time, we just apply Ku as the discount rate to CCF.

No circularity….and we have more time to focus on building the better forecast for FCF and TS.

Now I could see WACC applied to FCF is not the best option…easily leading to incorrect TS which might not always be there for the company at tax loss situation, and the constant leverage assumed.

Notes from Ignacio Velez-Pareja: (Note: I put in italics)

For clearness, when you wish to use the name WACC. it is better to say WACC for the FCF or for the CCF. For Ku as discount rate for TS, in the first case, it is Kd(1-T)D%+KeP% or BETTER, Ku-TS_t/V-t-1. Please throw out the first formula for WACC for the FCF to the trash. In the second case, CCF, WACC is Ku = KdD%+KeE%. Throw out the last formula  to the trash. Just use Ku and that’s all.

We have 5 methods: 3 of them have circularity and 2 don’t. No circularity: APV and PV of CCF at Ku. Circularity: PV of CFE at Ke, “general ” WACC and textbook WACC. 

You are 100% right when you say that using Ku and CCF gives you time to devote to make a better forecast and models. 

Please notice that Ku = KdD%+KeE% is true ONLY when Ku is the discount rate for TS. Look at the other tabs/sheets for other discount rates (Kd, Ke or any number) and see the formulas you have worked on in the case of Ku as discount rate of TS and the others. Try calculating Ku = KdD%+KeE% for each case and you will notice that the ONLY case when it is identical to Ku is when Ku is the discount rate for the TS.

In the literature, it seems to me that people mix cases (discount rate for TS) even for perpetuities. For perpetuities, the case of Ke is as follows:

  1. For Ku Ke = Ku + (Ku-Kd)D/E for finite cash flows AND perpetuities.
  2. For Kd, in general, and for finite CFs: Ke= Ku + (Ku-Kd)[Dt-1/Et-1 – VTSt-1/ Et-1] .  For perpetuities. remember that VTS = KdDT/Kd=DT, hence, Ke= Ku + (Ku-Kd)[Dt-1/Et-1 – (KdDT/Kd)t-1/ Et-1] = Ku + (Ku-Kd)[Dt-1/Et-1 – (DT)t-1/ Et-1]. And then you have the popular Ke formulation for perpetuity (that many wrongly use for finite CFs): Ke= Ku + (Ku-Kd)[Dt-1/Et-1 – (KdDT/Kd)t-1/ Et-1] = Ku + (Ku-Kd)(1-T)Dt-1/Et-1
  3. Those many that use (or used) Ke=Ku + (Ku-Kd)(1-T)Dt-1/Et-1 were authors such as Brealey and Myers, just to mention one pair of Holy Cows in finance books. 


Back to my videos, in the next videos, I will use the TS discount rate at Kd (Cost of Debt).





Pengadilan Pajak di California, Amerika Serikat yang melibatkan harta kekayaan (Alm.) Michael Jackson antara Estate of Michael J. Jackson (Deceased) (selanjutnya diacu Estate saja) dengan Kantor Pajak Amerika Serikat (the Internal Revenue Service, atau disingkat IRS) menarik perhatian terkait nilai pasar wajar dari hak publisitas (right of publicity) almarhum mencakup nama dan citranya.

Sebagai latar belakang case ini bisa dibaca di tulisan Robert W. Wood berjudul “Even After Death, Michael Jackson Has to Deal with the IRS”.

http://www.americanbar.org/publications/blt/2013/10/03_wood.html (diakses pada tanggal 18 Februari 2017).

Bahkan Blomberg menurunkan satu artikel pada tanggal 1 Februari 2017 menarik yang ditulis oleh Devin Leonard berjudul “Michael Jackson is Worth More Than Ever, and the IRS Wants Its Cut”, yang mengulas sengketa terkait valuasi Estate of Michael Jackson. Di sini IRS mengklaim bahwa Estate seharusnya dinilai sebesar USD 434 juta, dan bukan sebagaimana yang dinyatakan oleh Estate hanya sebesar USD 2.105. Estate mengklaim hanya nilai USD 2.015 karena pada saat wafatnya, almarhum sedang menghadapi banyak masalah skandal.

(lihat https://www.bloomberg.com/news/features/2017-02-01/michael-jackson-is-worth-more-than-ever-and-the-irs-wants-a-piece-of-it, diakses pada tanggal 18 Februari 2017)

Tulisan Michael Cohn pada tanggal 8 Februari 2017 juga membicarakan hal ini, dimana diberikan judul “Court Hears IRS Dispute over Value of Michael Jackson Estate”).

(lihat https://www.accountingtoday.com/news/court-hears-irs-dispute-over-value-of-michael-jackson-estate, diakses pada tanggal 18 Februari 2017)

Dalam prapengadilan, pihak Estate mengajukan permohonan agar pihak Pengadilan Pajak tidak menggunakan (exclude) laporan valuasi yang diterbitkan oleh ahli intellectual property Weston Anson (CONSOR) dengan pertimbangan beberapa alasan. Salah satunya, pihak ahli Anson memasukkan nilai untuk usaha yang sangat spekulatif, seperti Michael Jackson taman bermain (theme park). Namun sebagai alasan terbesar keberatan pihak Estate adalah bahwa laporan valuasi mencakup kombinasi (mash-up) dari berbagai hak (rights) yang berbeda-beda, dimana pihak Estate menyebutkan hal ini menyalahi ketentuan peraturan di Amerika Serikat bahwa setiap item intellectual property wajib dinilai secara terpisah. Kombinasi hak-hak yang berbeda-beda disebutkan meliputi nilai nama Michael J. Jackson dan foto/gambar (likeness), dan katalog hak-hak penerbitan (publishing rights), bersama-sama dengan nilai aset lainnya yang dimiliki almarhum pada saat wafatnya, yaitu hak dagang (trademarks), hak cipta (copyrights) di musik dan hak almarhum sendiri untuk menerima royalty sebagai penampil (performer).

Menarik membaca tanggapan dari hakim Pengadilan Pajak di Amerika Serikat, Mark V. Holmes yang menyatakan bahwa laporan valuasi Anson tidak seharusnya dikecualikan atau tidak dipertimbangkan.

Dikutip seutuhnya, dikatakan:

This is an especially interesting legal question. In a world without transaction costs, it wouldn’t matter if publishing rights, performance royalties, trademarks, etc. were valued separately because a rational buyer would value them as if they could be put together in the most profitable way even if they were bought separately. But it is entirely possible that trial will show that these separate rights would be more valuable if used together. If so, and if the Estate owned these separate rights, it might well be the case that they are worth more together than they would be if summed separately.

Terjemahan bebas:

Ini adalah pertanyaan legal yang cukup menarik. Dalam suatu dunia tanpa biaya transaksi (catatan: Penulis teringat dunia ideal teori M&M dalam manajemen keuangan), bahwa tidaklah menjadi masalah jika hak-hak penerbitan, royalti penampilan, hak dagang, dan lain-lain dinilai secara terpisah atau tersendiri-sendiri karena seorang pembeli yang rasional akan menilai seluruh hak-hak tersebut seakan-akan seluruh hak-hak tersebut dapat ditempatkan dan dimanfaatkan dalam cara-cara yang paling mendatangkan keuntungan, sekalipun masing-masing hak-hak tersebut diperoleh secara terpisah. Akan tetapi sangat mungkin bahwa pengadilan akan dapat menunjukkan bahwa hak-hak yang terpisah ini akan lebih berharga (atau nilai keseluruhan akan lebih tinggi) jika hak-hak tersebut dipergunakan secara bersama-sama (catatan Penulis: akan ini berarti manfaat sinergi?). Jikalau demikian, dan jika pihak Estate memang memiliki hak-hak terpisah ini, ada kemungkinan yang baik bahwa keseluruhan  hak-hak tersebut akan memiliki nilai yang lebih tinggi daripada kalau nilai masing-masing hak-hak itu dijumlah secara terpisah.


Keputusan Hakim Mark V. Holmes tertanggal 3 Februari 2017 dapat dibaca dalam lampiran tulisan ini dalam bentuk pdf.


Membicarakan manfaat “sinergi” [Catatan: pihak Akuntan punya nama tersendiri, yaitu “goodwill” untuk kehadiran sinergi?]  dalam valuasi dan kemudian berusaha memecah-mecah ke dalam masing-masing aset (baik tercatat atau tidak tercatat di neraca atau laporan posisi keuangan), merupakan tantangan tersendiri. Banyak hal-hal yang berusaha diperkenalkan oleh para ahli valuasi, terkait ini, misalnya dalam konteksi valuasi nilai korporasi atau bisnis, adanya konsep “normal or normalized earnings/margin”, “[positive, negative] abnormal earnings/margin”, “excess earnings/margin”, “competitive margin”, yang kadang bisa menimbulkan interpretasi yang berbeda-beda, termasuk data yang akan digunakan. Isu yang lain, apakah dipakai “accounting [book value] earnings/margin” atau “economic earnings/margin”?


Penulis juga teringat akan buku Determining Value: Valuation Models and Financial Statements oleh Richard Barker (Essex (England): Pearson Education Limited. 2001. Halaman 109), yang menyebutkan:


An intractable valuation problem is that this total value cannot be disaggregated across each of the assets individually. This is due to synergy between assets. A company does not create value simply by holding assets. It creates value by means of a judicious combination of expenditure decisions, in areas as diverse as recruitment, product, developments, plant construction, advertising, service delivery and operations management. It is the combined effect of each of these resource allocations that gives rise to an income stream, and thereby to a value for the company as a whole. Viewed in this way, it is unclear what the term “value” means when applied to individual assets in the balance sheet. An individual asset may have a market price, as discussed above, but its value to the company will depend inextricably upon its relationship with all other resources deployed by the company. [Catatan: bagian yang dipertebalkan, disengaja untuk penekanan].



Dari yang dikatakan oleh Richard Barker, kehadiran “sinergi” antara aset berwujud (tangible assets) dan tidak berwujud (intangible assets), dan “item yang saat ini belum teridentifikasi (oleh akuntan), yang bisa ada wujud atau tidak berwujud, namun umumnya dalam level tertentu tetap ada wujudnya, misalnya hasil print-out (unidentifiable items)” sangat krusial untuk terciptanya “nilai” (value). Walaupun secara umum dikatakan bahwa terlepas apapun item tersebut, mau diberi label, termasuk yang saat ini belum banyak diberi “nilai” dalam laporan keuangan perusahaan misalnya manajemen, proses pengambilan keputusan, sumber daya manusia, standar prosedur operasional, rantai pemasokan (supply chain), teknologi informasi, bahan-bahan dan tepat sasar program-program marketing, eksekusi program yang terarah dan terukur, namun semuanya diyakini dan memang sudah terbukti, bersama-sama, melalui hubungan dan interaksi (relationship and interaction) yang kompleks akan sangat diperlukan guna terciptanya kemampuan perusahaan atau bisnis dalam menghasilkan pendapatan (revenue), laba (earnings) dan arus kas bebas (free cash flow).


Kemampuan masing-masing item dalam memberikan kontribusi bagi terciptanya kemampuan perusahaan/bisnis mendatangkan pendapatan, laba dan arus kas bersih, niscaya justru tidak signifikan, namun melalui interaksi itulah yang menjadi kunci sangat krusial. Artinya, masing-masing item mungkin saja bernilai rendah, namun pada saat dikombinasi, di-bundle dalam suatu proses, akan mendatangkan nilai yang tinggi.


Dua diagram ini di bawah ini bisa memberikan gambaran kehadiran “hubungan/interaksi” diantara para sumber daya menurut penulis jauh lebih penting dalam penciptaan nilai.


Diagram 1: Value Map – Identifikasi Sumber Daya


Sumber: Brand Finance Plc


Diagram 2: Value Map – Pengelompokan Sumber Daya dan Menaksir Nilai Kontribusi



Sumber: Brand Finance Plc


Kedua diagram di atas diambil dari tulisan Tim Heberden berjudul Intellectual Propery Valuation and Royalty Determination (yang dimuat dalam buku berjudul International Licensing and Technology Transfer: Practice and the Law, editor Adam Liberman, Peter Chrocziel dan Russell Levin. Pemuktahiran tahun 2011 yang diterbitkan oleh Wolters Kluwer Law & Business).




Jakarta, 18 Februari 2017


US Tax Court 2017 Estate of Michael J. Jackson vs Commissioner of IRS