20080630-奥纬咨询-Who_s_Seaworthy_in_a_perfect_storm_36页_1mb

Financial Services Firm Valuation in Downturns

Background: The 2007 financial crisis was termed a "perfect storm" due to liquidity issues, asset price deflation, and economic slowdown. Historical analysis of seven crises since 1980 shows valuation impacts follow patterns impacted by business models and long-term capital structures. The industry's frequency of crisis exposure necessitates proactive crisis readiness.

Key Conclusions & Recommendations:

• Valuation resilience largely depends on pre-crisis business models and capital positions, not short-term adjustments. Choosing the right operational structure ("business model") before crises is paramount.
• Companies are categorized into:
  • "Battleships": High-resilience firms at prime position for deal activity.
  • "Tankers": Solid performers but value down due to market disconnect or capital cost.
  • "Life-rafts": Poorly performing entities requiring rigorous core restructuring or acquisition.
• Survival/valuation maintenance strategies:
  • Focus on core businesses, improve transparency with Investor Relations, and effectively manage earnings volatility.
  • Mergers & Acquisitions (M&A): A key strategic driver incentivizing acquisitions, especially during downturns, yet historically, "Battleships" lag in executing this.
  • Ensure sufficient capitalization to mitigate value erosion.

Key Findings:

• Valuation & Earnings Volatility: Market expectations and earnings predictability heavily influence prices. Meeting forecasts is critical.
• Business Model (Structure):
  • Universal banks showed better resilience historically.
  • Geographical, business, and revenue diversification decreases vulnerability.
  • Retail and corporate-focused banks often more susceptible to specialized lending issues.
• Capital Leverage: Capital ratios do not drive valuation changes significantly during downturns. Higher capitalization preceding crises mitigates value losses.

Takeaways:

• Strategic Focus: Prioritize core business and long-term capital build-ups during prosperous periods to sustain through crises.
• Operational Leverage: Dividend policy, management changes, and operating levers have minimal impact. Focus should be on fundamental choices before crises.
• M&A Opportunities: Undervalued "Tankers" offer acquisition opportunities to "Battleships," though strategic due diligence is needed.
• Proactive Communication: Vital for firms with valuation-performance mismatches to clarify strategies and risks.