VALUATIONSIM
ValuationSim is a
business simulation designed to be used in corporate valuation courses. It
simulates a small private equity firm that acquires companies based on their
valuations using assigned budgets in consecutive rounds. Students in teams of two or three
individuals perform DCF based valuations using data and assumptions provided at
the beginning of each round and then decide what acquisitions to make. The aim
in each round is to have the lowest valuation errors and to generate the
highest return from the acquired firms.
The data and the
assumptions are few and simple in the first rounds. As the simulation
progresses, the data and assumptions increase in quantity and
complexity. This process allows the participants to gradually improve
their valuation skills using basic techniques at the beginning and
more refined techniques at the end.
There are instructions
and a tutorial for each round. Once students enter their valuations for
each firm and their decisions on which firms to acquire, the administrator of
the simulation processes the round and publishes reports with the results.
Students are required to use Excel in their valuation and to upload their file
to the website showing their work. These files are downloadable by the
instructor, but not required to evaluate team performnace.
After each round, team
reports provide information on forecast errors and annual returns for each of
the firms acquired. A class report allows students to compare their performance
relative to other teams infusing a competitive environment that results in
higher motivation to succeed while learning valuation techniques.
Team valuations are
compared to the valuations performed by the simulator using the DCF method.
Students are required to use FCFE, FCFF, and the comparables methods of
valuation in a sequential mode. By applying valuation models and techniques for
many firms in multiple rounds learning is reinforced. The simulation also
improves students' skills in financial modeling using Excel.
After each round a score is assigned to each team based on the accuracy of their valuations and on the annual return of the acquired companies after one year, including the spread between the acquisition price and its intrinsic valuation. General feedback is given after each simulation round. At the end of the simulation a final score is assigned. The simulation is administered on www.asdsim.com.
