Strategic business valuation

Citation

Bontis, N., Bart, C.K. and Wakefield, P. (2007), "Strategic business valuation", Management Decision, Vol. 45 No. 9. https://doi.org/10.1108/md.2007.00145iaa.001

Strategic business valuation

The papers in this special issue highlight some of the most cutting edge research in the field of strategic business valuation. All of the selected papers in this issue deal with the multi-faceted perspective of evaluating assets that are both financial and intangible in nature. As a collection, this issue sets the groundwork for many years of future hypothesis development and testing. The authors of this special issue were all featured at the 1st World Congress on Strategic Business Valuation hosted by McMaster University in January, 2007.

The first paper in this collection is the transcript from the keynote address delivered by Jonathan Wellum, CEO of AIC Limited. AIC manages approximately $10 billion in assets and features a growing portfolio of mutual funds, segregated funds and corporate class funds. AIC was also the featured sponsor of the World Congress. In his presentation, Jonathan Wellum highlights the investment tenets of a long-term value investor and then proceeds to align long-term value investing with long-term stewardship of economic resources. The observation is made that more and more market participants are increasingly dominated by short-termism and hence less interested in stewardship.

George Athanassakos surveys CEOs of large Canadian companies and examines the relationship of a number of explanatory variables, including stock price performance, to the probability of using value-based management. The findings in this study compare quite closely with those in the USA with the major difference being that in the USA the largest proportion of firms use EVA, especially at the corporate level, whereas in Canada, EVA represents the least used method, especially for the entire corporation.

Sarbanes-Oxley is motivating corporate boards to bring heightened scrutiny for all aspects of the acquisition process, including valuation. This paper by Odilon Patrick Lemieux and John Banks examines how in addition to the high-tech M&A strategic objective, the decision on the post closing integration strategy should be considered as part of a target’s firm valuation. The authors propose a framework to guide high-tech firms with due diligence and valuation.

Nick Bontis, Lorne Booker and Alexander Serenko analyze survey data from 8,098 respondents in a large financial services firm. They determine that customer satisfaction enhances reputation in the service environment. It was also discovered that reputation partially mediates the relationship between satisfaction and loyalty, and that reputation partially mediates the relationship between satisfaction and recommendation.

In the fifth paper of this issue, Donovan Cox, Anne Wilcock and May Aung propose a new measure for organization health. A cognitive mapping process through narratives is used to operationalize a tripartite paradigm framework to measure human capital. This diagnostic tool can assist stakeholders in identifying evidence of decline early enough in the history of an organization for proactive remedial action to be taken.

The goal of the sixth paper in this issue is to enable readers to achieve an unprecedented leap in performance as a result of major acquisitions. Jay Chatzkel and Hubert Saint-Onge describe a process that fuses both growth and expense cutting synergies to accomplish the quantum leap performance gains, especially during the integration stages. These capabilities enable the successful integration of the acquired organization and the emergence of the new entity.

Tobias Sällebrant, Joakim Hansen, Nick Bontis and Peder Hofman-Bang conduct a novel empirical research study that examines the relationship between risk and transparency with regards to a company’s intellectual capital assets. The objective of this study is to evaluate how the systematic and idiosyncratic risk of publicly traded companies correlates with the degree of available information regarding their intellectual capital statements. The results show a negative correlation between idiosyncratic risk and transparency and a positive correlation between market risk and transparency.

Sanjoy Bose and Keith Thomas link two key disciplines in finance and science in a way which is representative of the many challenges in the development of the knowledge economy. They propose the formulation of a new process model based on recent developments in value-driver research.

Kimiz Dalkir, Erica Wiseman, Michael Shulha and Susan McIntyre provide an assessment framework for evaluating the success of knowledge management initiatives in a government setting. First, they conducted a brief review of the leading thinking on knowledge management and intellectual capital measurement approaches. Second, they introduce the Results-based Management Assessment Framework (RMAF) as the most appropriate measurement framework for intangible valuation. Finally, they describe the methodology used, survey design and data collection process.

In the final article in this special issue, Gerhard Kristandl and Nick Bontis propose a unifying definition of intangibles by examining the phenomenon through the conceptual lens of the resource-based view (RBV) of the firm. They map the main elements of the RBV against varying definitions in the extant literature and then propose their own unifying characterization of intangibles.

We would like to acknowledge the support of four student volunteers who helped in the processing and administration of several hundred papers that led to this special issue: Ashima Bhatt, Vikram Kaloe, Melissa Marvyn and Josh Grant. We also invite you all to participate at the McMaster World Congress in the future. Please be sure to visit our web site at http://worldcongress.mcmaster.ca for further information.

Nick Bontis, Christopher K. Bart, Patricia WakefieldAIC Institute for Strategic Business Studies, DeGroote School of Business, McMaster University, Hamilton, Canada