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The Dividend Discount Model (DDM): The Black Sheep of Valuation?

Mergers and Inquisitions

The Dividend Discount Model works well in two main cases: Companies with Special Legal/Regulatory Requirements – For example, banks must maintain a certain amount of regulatory capital (mostly Common Shareholders’ Equity), so they issue dividends based on their capital targets, and you “back into” the proper dividend numbers in models.

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Cooley’s 2023 Cross-Border M&A Year in Review: Navigating Choppy Waters into a More Buoyant 2024

Cooley M&A

The higher interest rates escalated borrowing expenses, making mega-deals (deals valued at $5 billion or more) significantly more expensive, due to their heavy reliance on debt financing, and impacted valuation multiples with higher discount rates. The aggressive rate hikes contributed to the decline in M&A activity in 2023.

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