The Amsterdam Institute of Finance offers the Valuation program for finance professionals who are keen to refresh and sharpen their skills in company valuation taught by prof. Matti Suominen. A view from the classroom:
The Valuation program has been a mainstay of the Amsterdam Institute of Finance for years, drawing finance professionals from diverse walks of life. We’re joined in the classroom by investors, bankers, representatives of family offices, and government fund managers. Small wonder: valuation lies at the heart of any process of investment, and methods of valuation are constantly being redefined through corporate and academic research. While there is a time and place for simple EBITDA-multiple valuations, this program also deals with more advanced valuation techniques such as the discounted cash flow method and the proper calculation of the WACC (weighted average cost of capital). Use of discounted cash flow method calls for some non-trivial modelling and a sharp insight into what data is relevant for an accurate valuation. Both skills are central to the program which is split evenly between theoretical instruction and hands-on case work.
“Just like mastering the piano it takes many hours of work to gain all the skills to prepare an accurate valuation.”
Professor Matti Suominen
Professor Matti Suominen has been with the Amsterdam Institute of Finance for over twenty years in addition to being on the faculty of the Aalto University School of Business in Finland and working with many top tier consultancy firms. In his opinion valuation is as much a matter of knowledge as it is of practice. Just like learning to play tennis or mastering the piano it takes many hours of work to acquire all the skills needed to complete a thorough and accurate valuation. The focus is on developing these practical skills, says Suominen. It is also the biggest difference between how valuation is taught in a regular business school or MBA versus in a specialised program like this. In a dedicated program, a lot more time is devoted to working out the details of cases based on real life situations. For instance, at some point during the week, participants worked at the valuation of a well-known steel company. Participants not only had to figure out whether the company was over- or undervalued, but also assess where the opportunities for improvement for a potential new owner were to be found.
Value Drivers
On the theoretical side of things, the course offers a deep dive into the formulas used in valuation by zooming in on the methodologies and assumptions behind the variables. Take for instance the cost of capital and the related variable beta, that describes how the company relates to the general economic environment and the aggregate stock market. Companies with a beta value of one tend to rise and fall in line with the general growth of the economy. Companies with a beta value above one tend to gain in an accelerating economy (and do worse when the chips are down), while companies with a value below one tend to do better in downturns. In this Valuation program the methods of how these numbers are gathered based on historical data and sector analysis were discussed. At the end Prof. Suominen set the group to the task of estimating the appropriate the cost of capital for a real company. Again, for the class to get a feel for the formulas and to sharpen the intuitive valuation skills. The point is obvious: uncritical assumptions lead to inaccurate valuations on one side and understanding the weight and relation between the variables in the equation gives dealmakers a sense of where to look for when it comes to potential room for improvement. Knowing when a number is out of the ordinary gives good clues as to where to look for deeper problems or opportunities in a business case.
Valuation in the real world
What’s also remarkable about Prof. Suominen’s class is the effortless way in which the practice of valuation is integrated with wider thoughts on the economy in general or the day-to-day work of the finance professional. In what at first seem to be casual digressions into the current events, like the state of the international bond market or the rising inflation, are actually ways to view broader economic forces through the lens of company valuations. It is only fitting that the course is concluded with a reflection on what values the participants truly have been calculating for the past days. Is it the value strictly to the owners of the stocks in the company? Should we approach value in a broader sense and not only calculate the enterprise value, but also look at the value to the employees, consumers, and other stakeholders? What about the environmental and political impact? Also, what is the role of personal factors, like the personal view of the current CEO or business owner? Suominen clearly sees the trend of moving away from strict stockholder first-models to more integrated approaches taking into account a range of factors in consideration.
The program offers an effortless integration between the practice of company valuation and thoughts on the general economy.
An additional advantage of the Amsterdam Institute of Finance is that it is, well, located in Amsterdam. Programs take place in the city center, providing ample opportunities to explore the city in the off hours. It’s also a great opportunity to reach out and connect with professionals in the open and dynamic financial industry of Amsterdam, which has seen a sizeable growth in the past years and is rapidly gaining a reputation as a hub for innovative fintech companies. Participation in the program also connects you to the vibrant AIF Alumni Network, not only in Amsterdam, but all over the globe.
Improve your valuation knowledge and skills in three days. Join ambitious professionals for the challenging Valuation program by Professor Matti Suominen (Aalto University School of Business) at Amsterdam Institute of Finance. Learn more & reserve your place here.
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