Strategic analysis and valuation of Falck A/S

Thomas Skaarup

Student thesis: Master thesis


In the past year and a half there has been much speculation as to whether Falck would be the next large company to be listed on the Copenhagen Stock Exchange. When Nordic Capital announced its decision to sell all of its shares it was on the cards, but because of the financial insecurity in the market, Falck and Nordic Capital decided to look for an alternative investor. In December 2010 The Lundbeck Foundation emerged and purchased 36% of Falck`s shares at a price, valuing Falck at 7.888 bn. with the new ownership Falck re-launched its international globalization strategy. The initial purpose of this thesis was to estimate the value of Falck prior to an IPO, but with this subject no longer relevant, I found it interesting to compare a theoretical based value with the value of 7.888 bn. estimated by the Lundbeck Foundation`s purchase of Falck. The main objective of this master’s thesis has therefore been to determine a fair value of Falck A/S share as of 1. Dec 2011. The valuation method is based on the Discounted Cash Flow model, thus raising a number of interesting issues such as estimating WACC components from a group of comparable companies – the peer group. The first part of the thesis is a strategic analysis of Falck, where the strong business model of Falck and a lack of real competitors paint a picture of a very healthy company. The following financial analysis ends up with the same conclusion, with Falck improving the profit margin year on year while creating growth from retained earnings rather than debt. In the budgeting part of the thesis a forecast period of 10 years is chosen reasoning additional time is needed to fully exhaust the new markets entered during the large ongoing expansion. The weighted cost of capital is then determined at 7.47%, with the Beta value being estimated from a peer group - the estimation of beta is associated with a relatively high error margin, mainly because no companies resemble Falck 100% and therefore are exposed to the exact same risks. By carefully selecting a peer group, however the error margin can be greatly reduced. Finally the value of Falck is estimated at DKK 15.501 million as of 1st December 2011, before the sensitivity analysis points out the flaws of the DCF-model.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2011
Number of pages92