Market Value Added (MVA)

The market value added (MVA) is the difference between the current total value of a company (market value of equity plus debt) and the total amount of money made available and paid in by all investors (equity providers, debt capital providers) of the company over the course of time.

According to the intention, the MVA is a concept of excess profit, only it does not refer to a single year, as is the case with EVA, but to the entire previous life of the company.
The MVA would like to express which part of today's market-oriented total value is explained by payments by investors and interest with a market rate of return and which part is due to the above-average efforts of the management over the last few years, through which above-average perspectives have been created are also expressed in the market value.

The decomposition is:

Today's total value = MVA + present value (with a market rate of return based on today's point in time) of all previous payments from investors

Indeed, businesses increase in value over time for two reasons.

1. Es gibt einen reinen Zeiteffekt. Werden die von Investoren eingezahlten Geldbeträge in durchschnittlicher Weise eingesetzt, dann sind Wertsteigerungen entsprechend der marktüblichen Rendite zu erwarten. Tätigen die Investoren keine Entnahmen in dieser Höhe, dann steigt der Wert des Kapitals. Dieser Zeiteffekt ist bei der Berechnung des MVA zu korrigieren. Hierzu werden die früher von Investoren überlassenen Gelder mit der marktüblichen Rendite (Cost of capital) auf den heutigen Bewertungszeitpunkt verzinst.

On the other hand, the market value of a company increases over time (additionally), provided that values, including intangible values, have been created with above-average management and above-average ideas, which give a perspective that is then expressed in market value. In other words: the market value of the company increases when there is outperformance or excess profits.

The MVA plays a central role in the EVA consulting tool of the Stern Stewart & Company consulting firm. Here it is postulated that the outperformance amounts achieved in the intervening years must be added to the founder's payments made years ago in order to maintain the company's entire market value. The outperformance of the individual years is measured by the economic value added. Therefore, according to the management consultancy, the ultimate goal is to sustainably increase the EVA.

Wer die Zielsetzung der Unternehmung am MVA festmacht, darf nicht nur die Vergangenheit betrachten wie das in den bisherigen Formeln geschehen ist. Es muß eine Formulierung gefunden werden, die es erlaubt, die Zielerreichung auch für noch anstehende Entscheidungen zu berechnen. Gelingt das, kann das Konzept des MVA auch zur Company valuation herangezogen werden. In dem Servicepaket EVA beschreitet die Beratungsfirma Stern Stewart Co. hierzu diesen Weg. Zunächst werden die Gegenwartswerte aller früheren Einzahlungen von Investoren durch eine Gegenwartsgröße ersetzt.

For this purpose, the idea is developed that the earlier payments made by investors can be found on the one hand in the NOA (Net Operating Assets), i.e. in the assets that are tied to the business today. The present time is denoted by n as before, which is why we write NOA ”for the current value of the assets tied up by the company. Normally, NOA “is interpreted as the replacement value of the operationally necessary assets, that is, as the value for the replacement of all parts of the business assets.

On the other hand, the earlier payments made by investors are found in non-business assets. The market value of the non-operational assets is designated “NBV”. This means that the investors' earlier payments no longer need to be known in detail, because they are all recorded by NOA "+ NBV"
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