Module 5

Question 1

What are the 2 main contributing factors that impact Market Multiples?

Answer 1

1) Economic Outlook

2) Company Size

Question 2

What is the definition of RAB?

Answer 2

Regulated Asset Base - value expressed as : Gross Current cost of Assets + Provision for Depreciation = Net Book Value

Question 3

How is RAB value determined within most Infrastructure industries in the US? and in the EU or UK?

Answer 3

The Value of RAB is the same as the Net Book Value of the Assets. In the EU or Uk - the RAB may be equivalent to the Historic-Cost Net Book Value + or - an inflation adjustment.

Question 4

List 8 Common Market Multiples for Private Equity and Infrastructure Investments

Answer 4

1) EV/RAB
2) EV/EBITDA
3) EV/(EBITDA-CAPEX): for Capital Intensive Business
4) EV/FCFF-EBITDA: accurate rep of cashflow multiples
5) EV/EBIT: Focus on Acct depreciation (Exit under IPO)
6) Price/Earnings: Less commonly used for private market
7) EV/Revenue: provide data point for high growth business in early stage tech or pharma
8) Price/Net Asset Value : Expression of price relative to book values used common in large nat resources or land holdings

Question 5

What core differences are seen when evaluating market transactions against a targeted company?

Answer 5

1) Company Size Differs
2) Profitability, Historical Growth and forecasted Growth
3) Quality and sophistication of management teams
4) Product and geographic diversification
5) Buyer synergies that may have impacted market transaction valuations