Wirtschaftswissenschaftliches Forum der FOM. Band 15. Clemens C. Jager, Volker Lombeck (Hrsg.) Corporate Valuation of Web 2.

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1 Wirtschaftswissenschaftliches Forum der FOM Band 15 Clemens C. Jager, Volker Lombeck (Hrsg.) Corporate Valuation of Web 2.0 Companies Shaker Verlag Aachen 2013

2 Corporate Valuation of Wteb 2.0 Companies CONTENT Editors'Preface List of Figures List of Tables List of abbreviations I VIII X XIV 1. Introduction 1 2. Shareholder Value concept Basic principles Term and relevance Historical development Conceptual origin and motivation Idea and theoretical framework Shareholder Value and corporate valuation The Methodology of the Shareholder Value Approach Basic Principle Cash Flow Basics Estimating the Cost of capital Critical Analysis of the Shareholder Value Concept Accounting Figures as ineffective Performance Measurements Shareholder Value affecting Enterprise Strategies Critical Analysis of Calculation with Discounted Cash Flow Method Shareholder Value Approach as a Solution Statement for the Principal Agent Dilemma Stakeholder Value Approach as More Substantial Strategy than Shareholder Value Approach Shareholder Value Approach as Irresponsible Strategy 71

3 IV Corporate valuation of V\feb 2.0 Companies 2.4. Portrayal of the Stakeholder Concept Idea of Stakeholder Concept as an Enhancement of the Shareholder Value Approach Detailed Analysis of Stakeholder Approach Stakeholder Management Stakeholder Value Difficulties regarding the Stakeholder Analysis Comparison between Shareholder Value and Stakeholder Value Approach Different Orientations Impact on the Company's Management Influence on a Company's long-term Business Success Is the Stakeholder Value Essential for Creating Additional Shareholder Value? Consideration of Both Approaches' Advantages and Disadvantages Complement on Both Approaches Conclusion on Both Approaches Corporate Valuation Methods Foundations of Evaluation of Companies Basic Terminology Main Functions of Evaluation of Companies Causes for Conducting an Evaluation of a Company Objective, Subjective and Objectified Company Value Different Valuation Concepts Valuation via Discounted Cash Flow Methods Entity vs. Equity Approach Basic Principle of Financing Policy Free Cash Flow Approach Total Cash Flow Approach Adjusted Present Value Approach Evaluation of Procedures Earnings Value Method Different Terms of Earning Designation of the German Income Approach according to the IDWS1 121

4 Corporate Valuation of Web 2.0 Companies About the IDW German Income Approach according to the IDW S Determining future Earnings from operating Assets Capitalisation of future Earnings Valuation Formula according to the German Income Approach Multiples Valuation approach Valuation concept Multiple valuation process Presentation of practice-relevant multiples Strengths and weaknesses of multiple valuation approach Method of Net Asset Value Net Asset Value Approach Problems regarding the Method of Net Asset Value Stuttgart Method Principles of Stuttgart Method Calculation of Stuttgart Method Critical Analysis of Stuttgart Method Mean Value Approach Concept of the Mean-Value Approach Components of the Mean-Value Approach Real Option Approach Basic Idea of the Real Option Approach What are Options? Methods to Calculate an Option's Value Critical Assessment of the Real Option Approach Basic considerations of Web Development of the Internet Definition and Classification Web Business models in the Web 2.0 environment Valuation relevant characteristics of Web 2.0 companies Specifics of market environment Discontinuous corporate development 237

5 VI Corporate Valuation of Wfeb 2.0 Companies Specifics of cost structures Specifics of revenue generating Practical Application of Valuation Methods to Web 2.0 Companies Valuation of XING with DCF Method - Valuation Process Procedure Estimation of Future Cash Flows Calculation of the Cost of Capital Determination of the Corporate Value Interpretation of Results Valuation of the Web 2.0 Enterprise XING AG with Earnings Valuation Approach XING-The Web 2.0 Enterprise Parameters for the Valuation of XING's future Earnings Determination of XING's future Earnings Practical application of the multiple valuation approach by means of Facebook, Inc Methodical procedure Application of the four steps valuation process Interpretation of results Corporate Evaluation of Twitter Inc. Using the Multiplier Approach Introduction of Twitter Inc The Peer Group Assumptions and Facts, Selection of the Multiples Applied Measures of Data Densification Calculation Critical Assessment of the Results Valuation of Linkedin with Net Asset Value Presentation of Linkedin Adoption of Net Asset Value Method on Linkedin Assessment of the Practical Example 326

6 Corporate Valuation of Web 2.0 Companies VII 5.6. Evaluation of Xing AG with Stuttgart Method Evaluation of Xing AG with Stuttgart Method Critical Analysis of Evaluation Valuation of Xing AG with Mean-Value Approach Practical Approach of Mean-Value Approach Critical Assessment of the Mean-Value Approach ability for Web 2.0 Enterprises Summary of valuation with Mean-Value Approac Evaluation of the Company (Real Option Evaluation) DCF Evaluation Real Option Approach Evaluation Critical Assessment of the Evaluations Conclusion Resume 382 List of literature 384 Law Sources 425 Internet Sources 426

Valuation of Businesses

Valuation of Businesses Convenience translation from German into English Professional Guidelines of the Expert Committee on Business Administration of the Institute for Business Economics, Tax Law and Organization of the Austrian