Contingent Claim Valuations
Contingent Claim Valuations (CCV) is a revolutionary development in valuation techniques, to recognise the value of assets whose cash flows are contingent on a future event occurring. Typical examples would be the development of a pharmaceutical drug, an unknown oil field, or the development of a new product, innovation or service, with huge risk and uncertainty.
Earnings Valuations have some difficulty dealing with these firms having unused assets, or where the value of the assets cannot be easily linked to future cash flows.
CCV techniques sometimes use option valuation theory to value the underlying options present in many of these assets. Discounted cash flows techniques tend to understate the value of these assets, or punish them with higher discounting rates (higher WACC).
Real Options Valuations (See Real Options) tend to value these underlying options as a set of managerial rights to wait, grow, expand, use flexible operating processes or even abandon a project or the use of the asset even after the investment ahs been made. This technique removes a huge dysfunction that currently exists, between project investment decison making, and managerial flexbility.
Valuation of intangibles and Brands which employ methodologies to value intangible assets that are indentifiable, separable and capable of systematic valuation. Brand valuations are an example. There are three main approaches to value intangibles namely:
Key benefits of carrying out an earnings based valuation and/or contingent valuations are:
If you do have any questions please feel free to contact Allan Rodrigues on firstname.lastname@example.org
The Business Farm has experienced practitioners in this field of valuations with considerable market experience. Allan Rodrigues specialises in Real Options Valuations and brand valuations, particularly for high risk, uncertain projects.