Valuation of Falck: Strategic Analysis, Accounting Analysis and Valuation of Falck

Emma Førde

Student thesis: Master thesis


The purpose of this thesis is to determine the fair value of Falck A/S as of June 1st. 2017. This is done through five main sections; company profile, strategic analysis, financial analysis, budgeting and valuation. Falck is a Danish company founded in 1906 that provides emergency, assistance, healthcare and safety services through its subsidiaries. The company originally provided smaller rescue work in Denmark, but is today delivering services in 46 countries, worldwide. The global expansion has happened over a relatively short amount of time, mostly through acquisitions. Falck’s revenue has increased significantly from DKKm 10,193 in 2011 to DKKm 15,964 in 2016. Despite the growth, Falck’s financial results have not been impressive and after several disappointing years, the company has now changed leadership for the first time since 2004. The strategic analysis consists of an internal and external part, and is summarized in a SWOT. The internal analysis examines Falck’s resources and competencies for potential competitive advantages, whereas the external analysis examines the external factors that could affect Falck’s future earnings. Several opportunities and threats are found that might affect the company, but these vary between the four key business areas; Emergency, Assistance, Healthcare and Safety Services. The financial analysis is based on annual reports since 2011, and shows that return on equity (ROE) has been declining, primarily due to a reduced profit margin. Falck’s costs have increased with a higher rate than revenue, and this is likely associated with the quick expansion. The integration of acquired companies into Falck’s existing structure will be important for the future financial results. Based on the strategic and financial analysis of Falck, a budget for the next 10 years is created. The value of Falck is found by using the Discounted Cash Flow (DCF) model, and error-controlled by the Economic Value Added (EVA) model. The DCF-model is based on the budget and the estimated Weighted Average Cost of Capital (WACC) of 6.45%. The model indicates an equity value of DKKm 5,048 as of 1 June 2017, which leads to a share price of DKK 75.40. The estimated value is evaluated thorugh a sensitivity analysis, which concludes that the value is very sensitive to model inputs, especially the WACC. This indicates that the estimated value of Falck is associated with significant uncertainty.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2017
Number of pages94