Enterprise Valuation In Equity Investment

Towards a financing enterprise, financing has two ways. One is debt financing and the other is equity financing. Debt financing is a traditional way through bank credit or bond-issuing to bulid credit-debt relations between borrowers and lenders. Equity financing is to obtain investment through shares transfer or new shares issuing, and the investment obtained includes fixed asset, intangible asset, financial asset, etc. To investment institutions, equity investment is to acquire a percentage of shareholding of target companies by investing funds or shares. Looking from domestic equity investment, there are two types of enterprises involved. One is group holding companies (including listed and unlisted) who have a great deal of cash reserve due to high profitability, which stimulates the strong demand of investment. Under common circumstance, they establish a direct-investment department or register a new direct-investment subsidiary to invest on shareholding with their own money. The other is private equity investment fund (PE Fund), who is limited partnership fund through raising money from particular individuals and institutions. Thereinto, general partner (GP) acts as fund manger, providing fund management service with charging management fee. Limited partner (LP) is the actual money supplier, supplying money in accordance with investment agreement, and entitled to know how the fund works and how much they will get from the return. Fund trustees provide trusteeship and supervisor service, strictly avoiding fund’s risk. Herein equity investment refers to financial investment that is acquiring target companies’shares by investing money in, including angel investment (AI), venture capital (VC), private equity (PE) and pre-IPO, etc.PE investment takes long, with complex procedure and many parties involved, so PE takes high risk but with high return if target companies are able to finish IPO successfully. As of a deal of PE investment, transaction timing and deal structure are focused but transaction pricing is extremely important. As a result, to valuate target companies accurately is critical. This thesis studies listed companies in vehicle navigation industry and analyze the valuation of un-listed company TGF using enterprise valuation models such as market approach, discounted cash flow (DCF), etc., aiming to providing valuable reference for TGF in the process of equity financing.