Chapter I Introduction
1.1 Research Background
With the rapid development of the Internet economy, the number of Internet companies in China has increased rapidly, the scale of enterprises has been expanding, and the financing, mergers and acquisitions and other activities have become increasingly frequent. Different from the traditional enterprise, the Internet enterprise has the characteristics of initial investment cost is high, the product or service the future income uncertainty is high and the long payback period, determines the Internet enterprise value assessment is not simply the traditional enterprise value assessment model. On the other hand, Internet companies in the early days of the establishment, often put a lot of money, low economic returns, resulting in sustained losses. The majority of enterprises' financial support comes from venture capital investment. With the expansion of the size of the user and the increase in the value of the enterprise potential, Internet companies will get more working capital through IPO, thus making the source of corporate capital to equity financing. According to the special nature of the Internet business, forcing us to determine a reasonable and effective valuation system of the Internet business is very important. Therefore, the Internet enterprise value assessment has become a practice in the evaluation function to solve the problem.
At present, China's Internet industry is in a stage of rapid development, the Internet industry not only change people's communication, life and management, but also led to the transformation and upgrading of traditional industries in china. China's Internet companies mainly in the main board of Hongkong, the United States NASDAQ and New York Stock Exchange listed financing, such as Baidu, Sina, Ctrip, etc.. But a few Internet companies in the new three board listed, such as the focus of science and technology, music, etc.. With the opening of the new board, the future will have more Internet companies in this financing market, or underestimate the value of Internet companies are not conducive to the development of the Internet economy.
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1.2 The Significance of This Paper
With the development of the Internet economy, the Internet enterprises play more and more important role in our Chinese market. Under this circumstance, it is too difficult to get a quick development and open new business and market by transformation just depending on the study of their own products and technologies. So, a large group of Internet M&A cases appear in Chinese market. However, it was reported by some relative data that the rate of failure of these cases in China is very high. The traditional way of assessment of investment value is becoming out for nowadays Internet M&A. Thus, it has significant theoretical and practical meaning for us to figure out how to assess the value of Internet enterprises fairly and objectively. Though, the theories and study ways of assessment of investment value is mature, we still need to find the disadvantages and perfect it. Especially in the Internet field. As an new field, the development speed of it has beyond our prediction. Nevertheless, it also has its shortcomings--High risk and high yield. Especially in the key stage of transformation between traditional and new enterprises, this time ask some new requirements for traditional assessment of investment ways. By deep study on Internet enterprises’ characteristics and business model and comprehensive understanding of its background, we can work out a reasonable assessment system. Then, we can give a more integrative and accurate assessment theory for the financing and M&A in the Internet enterprises. Besides, it also can rich the theory of assessment of investment value.
In addition, with the development of global economy and the rapid adjustment of domestic industrial structure, as an important method for deploy the social resources, M&A is becoming a more and more important role in Chinese capital market. For the activities of M&A become more and more active, the reasonable assessment of investment value is a key for choosing the target enterprises and the price of M&A. If deepen the study of assessment of investment, the success rate of M&A will be increased together.
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Chapter II Literature Review
2.1 The Research on Economic Fundamentals
The technical means to realize the evaluation of assets value is the enterprise value evaluation method. Only when the enterprise value evaluation method itself is concerned, it is not unique to the process of enterprise value evaluation. In fact, the enterprise value assessment method in engineering, technology, statistics, financial management, accounting and other disciplines theory and technique, this system is a set of methods combined with the characteristics and the formation of enterprise value. The method of enterprise value assessment is not only related to the technical methods of other parallel theories. The difference is, enterprise value assessment methods of other disciplines basic theory and technology, in accordance with the inherent requirements of evaluation and reorganization of enterprise value assessment idea of enterprise value work to restructure, and constitute the method of enterprise value evaluation system.1 The component of value evaluation method of the enterprise by the specific system, according to the analysis of application of the principles and techniques of different methods, these methods can be summarized into three basic types, or three basic methods, namely cost method, income method and cost method.
With the development of Internet technology and innovative business model, industry market size in the whole Internet industry maintained a rapid growth momentum. Since 2013, China's Internet industry's big three: baidu, alibaba, tencent, set off a huge mergers and acquisitions boom. Between the Internet enterprise merger, acquisition and reorganization in resource integration to promote industry has played a positive role. Target enterprise value evaluation is the key factor in the process of m&a deals. The present situation and tendency of the development of the Internet industry and enterprise, the Internet enterprise customers, service characteristics, operating characteristics are different from traditional enterprise, and these factors will affect the Internet enterprise value evaluation procedure and evaluation result. It is due to the particularity of Internet companies that make the common valuation methods in the applicability of the Internet companies not only to the merger, acquisition and reorganization in order to maintain the Internet industry trade fair has a realistic significance, but also enriched the valuation method in the study of the theory of the Internet industry.
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2.2 The Financial Option Valuation Theory
The cost method is based on the book value of the assets and liabilities of the balance sheet, and the enterprise value is obtained by adjusting the value, which is the starting point of the reconstruction of the elements of the enterprise. Compared with the market method and income method, the evaluation result of cost method is more objective, and the operation is simple. Under normal circumstances, it is appropriate to use the cost method to assess the value of a holding company that only has an investment or has a real estate, and the assessment of the enterprise is not sustainable. Internet companies are asset light type enterprise, if the enterprise holds the balance sheet of the assets and liabilities of the re valuation to calculate the value of the enterprise, will ignore the potential resources of Internet companies, such as Internet companies have user resources, not in accordance with the method of valuation of the reset, this will cause the target of enterprise valuation the result is low, cannot reflect the development process of creating target enterprises in the future period the value of cost method is mainly used in the process of liquidation of target enterprise, but not for restructuring in merger and acquisition valuation.
By means of evaluation of enterprise and market and be evaluated enterprise similar enterprises compare and analyze the market, adjust and revise to the similar enterprises in the market value, and thereby determine a method of evaluating the enterprise value. The key is to market through market research, selection and assessment by one or several same or similar enterprises as reference, according to the analysis of the relevant circumstances of the enterprise, in essence, according to the enterprise and the goal enterprise to have a high degree of comparability in the commercial mode of operation, the target customer groups, to provide Internet service other aspects of the type, has a value that refer to the value of the enterprise, and then through the adjustment factor of the adjustment and the revision, so that the target enterprise value of the company.
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Chapter III .................. 31
The Research Method Application of the Discounted Cash Flow by Baidu ............... 31
3.1 The Definition of Enterprise Evaluation ............... 31
3.2 The Selection of Samples/ Data Collecting ............. 31
Chapter IV A Case Study of Baidu Valuation Theory .................... 53
4.1 The Evaluation Types Owned by Baidu.................... 53
4.2 EVA Model Parameters .................... 57
Chapter IV A Case Study of Baidu Valuation Theory
4.1 The Evaluation Types Owned by Baidu
This chapter takes Baidu Inc as an example, tries to use the EVA valuation model to assess the intrinsic value of Internet enterprises in China. The Baidu Inc as the research object mainly consider the following two points: first, Baidu has 10 years in the United States, the U.S. capital market is more mature, the stock price can reflect the intrinsic value of the enterprise; second, Baidu is the domestic Internet companies three "14 giants" is one of the representative in the domestic Internet companies.
This chapter is the intrinsic value of Baidu Inc enterprise basic ideas: firstly, qualitative analysis of the basic situation of the Baidu Inc, the macro environment and the company strategy and other aspects; secondly, to January 2, 2015 as the valuation date, respectively using EVA model, DCF model and P/E model assessment of Baidu Inc in the valuation date of the intrinsic value of the enterprise. Finally, the results of the valuation of the three models are compared and analyzed.
Internet has become a key industry which influences the economic development and changes people's life form in China. This part through the Internet macro and industry environment analysis, combined with the Baidu Inc's own situation, analysis of macro and industry environment on the future growth of the Baidu Inc or the impact factor. Baidu Inc macro and industry environment analysis mainly from four aspects of the political, economic, social and technical aspects of the introduction.
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Chapter V Conclusion
This paper demonstrates the applicability of the EVA valuation model to the valuation of Internet companies from two aspects of theory and empirical analysis respectively. From the theoretical point of view, the Internet enterprise organization is different with the traditional enterprise, its particularity in the growth mode, financing channels, cost structure and profit model and competitive advantages, the use of traditional value assessment theory and method is quite limited. The EVA valuation model makes up for the limitations of traditional valuation theory without considering the cost of equity capital, which can accurately reflect the cost of investment in Internet companies. At the same time, the EVA model of enterprise R & D costs reasonable capitalization, goodwill, reasonable amortization, etc., so that the Internet business valuation can better reflect the development potential of the enterprise. From the empirical perspective, this paper takes Baidu Inc as an example, using the EVA valuation model assesses the overall value of the enterprise on the DCF and P/E valuation valuation results, results were compared, results show that the intrinsic value of EVA valuation results can reflect the Baidu Inc.
There is no doubt that in assessing the overall value of the Internet business, compared to the traditional valuation model, EVA valuation model has more advantages. But it is clear that the EVA valuation model deficiencies still exist in the process of actual value assessment of enterprises, mainly reflected in two aspects: one is due to the uncertainty of future earnings, resulting in uncertainty of the intrinsic value of the enterprise, thus affecting the accuracy of evaluation to a certain extent. This is the initial stage of the Internet enterprise value assessment of the impact of greater; on the other hand is in the assessment process, the cost of equity capital and future growth rate of these two key indicators to deal with quite complex. This not only requires analysts have a solid professional knowledge, but also has a wealth of experience in forecasting, the assessment of the enterprise and its industry has a thorough and thorough understanding to improve the accuracy of the assessment value.
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