Clare Capital was the financial adviser to MetOcean on their partial sale to MetService.
MetService, the nation’s state-owned weather forecaster, paid $3 million for a 49 per cent stake in privately owned New Zealand oceanographic consultancy MetOcean Solutions, giving it a foothold in a market worth more than $10 million.
The purchase will allow Wellington-based MetService to expand its research capability and add customised oceanographic forecasting and consultancy expertise to its global offering. For MetOcean, the tie up enables it to expand internationally with an established partner.
If you ask the simple question of “what is a share price?” – many people struggle to answer. People will have an opinion on whether the share price of Telecom or Air NZ is too low or too high – but they can’t answer the simple question of “why?”. I usually get an answer about assets – but nothing very specific.
So how does (or should) an investment banker think about the value of a business?
I am going to use a minimum of jargon here – I promise. Please see the glossary page for some definitions of valuation terminology, why various terms are used and more information about the valuation methodology.
We are going to cover valuation techniques in a separate post – but here is the Valuation 101 of how investment bankers determine if a share is currently undervalued or overvalued. We use a piece of financial economics called a discounted cash flow (DCF) model. This is a key part of corporate finance. Now value does not always equal price – but as the Benjamin Graham quote goes, “In the short-term, the market is a voting machine and in the long-term a weighing machine”.
The DCF is the primary method in corporate finance theory for calculating value. In corporate finance – value is a DCF…