The Quest for Value: A Guide for Senior Managers

When selling, it is easy to fall into the trap of talking price or comparing yourself to your competitors. The Quest for Value illustrates how you can quantify delivering value to your clients. Listen to their needs and use your product or service to deliver a solution for those needs. You can use EVA as a method to define the solution for your customers by quantifying the benefit. You will earn your client's respect without having to lower price or fall into roadblocks set by your competitors.

A comprehensive overview of the emerging school of thought on valuation theory and financial analysis. A very useful and enlightening book to read for corporate finance practitioners and for undergrads aspiring for careers in strategic consulting and/or investment banking. Anecdotal passages clearly illustrate the arguments presented in the book. Although quite opinionated, Mssr. Stern and Stewart convey a compelling argument that dispells traditional and current analyticals. Although the subject matter is corporate finance, Mssr. Stern and Steward display noteworthy talent in writing/narration style, surprisingly transforming a mundane subject into an enjoyable and even humorous book.

I was introduced to The Quest for Value during my MBA program. The material covered in the book was the basis for my Finance course, and I purchased the book to examine the source material. Finance is a branch of Economics, not Accounting, and many of the assertions made by Stewart reflect that fact. Familiarity with the basics of Microeconomics will greatly facilitate an understanding of the concepts described in the book. The fact that Stewart's work builds on sound economic concepts should be considered a strength, and not a weakness. The fact that other investment valuation tools do not conform to standard economic theory (Asset-Based, Excess Earnings, etc.) is the primary weakness of those theories. Investors are generally concerned only with prospective cash flows and the risks associated with those cash flows. The EVA Model captures the essential factors determining return and risk, removing Accounting distortions, and allows managers, owners, and other stakeholders to make informed decisions. Portions of the EVA Model have been integrated into other valuation tools, but usually in a piecemeal fashion. The genius of the EVA Model is the consolidation of many useful theories into a single model. A word of caution. If you are planning to use the EVA Model to "beat the market", please read the book. Stewart, Merton Miller, Damodaran and others are strong believers in the efficient-market theory, which essentially refutes the notion that tools like the EVA Model can be used for such purposes. As far as the general acceptance of Stewart's theories, it has been my experience that most corporate Finance departments are run by Tax Accountants with a limited/non-existent knowledge of the economic principles espoused by Stewart. They remain (much like my Investment Management Professor [1998], who had little knowledge of Stewart) enamored of EPS and ROE, long after numerous studies have indicated a loose correlation between EPS/ROE and stock value. While the book won't help you "beat the market", it is an outstanding tool for performing valuations on Closely Held Companies. The Quest for Value, in combination with the works of Damodaran (Investment) and Shannon Pratt (The Valuation of Closely Held Companies, The Valuation of Small Businesses and Professional Practices), will greatly assist any efforts in the valuation of such businesses.

The Quest for Value is the best modern financial text available today and certainly the best written since Benjamin Graham's Security Analysis. I teach the Quest for Value to graduate students at the University of St. Thomas in Minneapolis and manage FalkerInvestments, an investment firm specializing in EVA investments. The Quest for Value is our financial bible.A few tips in reading this excellent book. Read the Preface by Joel Stern and Chapter 1, the introduction; then skip to Chapter 12 which deals with the best discussion of the concepts of cost of capital available today. Then read chapters 2 and 3 and select the following chapters based on what interests you.This book appeals to business readers at all levels, so those with less experience should not get bogged down in some of the more sophisticated areas of the book. In other words, it can be read selectively for content.

This book is a best guidance for understanding, caculating and making practical use of the EVA concept. It has been recognized as a great work which emphasize the importance of the shareholder value and open a new era in business decision making process. The author has not only concrete theoretical backgrounds but also many experiences in corporate practice. As a corporate financial staff, I got an amazing impact from this excellent book.