Читать книгу Applied Mergers and Acquisitions - Robert F. Bruner - Страница 141

The interest in self-sustainable growth had its origins in the work of two academicians, Merton Miller and Franco Modigliani (1961) (M&M), who asked the question: At what rate will the market value of the firm grow? They argued that the only kind of growth on which operating managers should focus is growth of value because any of the other bases of growth (e.g., sales or assets) are flawed guides¹⁶ for corporate policy; only growth of market value was consistent with an interest in value creation. M&M showed that the growth rate in market value is simply the product of two variables: the internal rate of return (IRR) of expected future cash flows, and the rate of reinvestment of that cash flow back into the firm.

(1)

Here K is the reinvestment rate of the cash flows, and ρ (or “rho,” a Greek letter) is the IRR of cash flows. The virtue of the M&M growth rate model is that it is economically correct: (1) it focuses on cash flow; and (2) it takes into account the time value of an entire stream of cash. The formula is deceptively simple: Whether the firm can reinvest in the same activities that produce a given IRR depends on a wide range of strategic assumptions such as the rate of technological change, the length of a product life cycle, or the persistence of competitive advantage. In short, the application of this model takes careful thought.