Valuation Overviews Flashcards
What is the famous Warren Buffet quote in regards to price and value?
- Price is what you pay
- Value is what you get
How do you value a company?
Valuation is a process of using insight from different relevant valuation methodologies to determine the value of the company.
What are some major valuation techniques?
- Public Comparable Analysis
- Acquisition Comparable Analysis
- Discounted Cash Flow Analysis
- Merger Consequences Analysis
- Leveraged Buyout Analysis
- Liquidation Analysis
- Replacement Cost Analysis
Public Comparable Analysis identifies value relative to ________.
Public Comparable Analysis identifies value relative to peers.
Acquisition Comparable Analysis identifies value relative to ________ _________.
Precedent Transactions
Discounted Cash Flow Analysis measures the _______ value of a company.
Intrinsic
What is the question you are trying to answer for an LBO Analysis or Merger Model Analysis?
How much could the buyer affoard to pay?
What is a Merger Model Analysis looking at?
How much a strategic buyer could pay.
What is a Leveraged Buyout Analysis looking at?
How much a financial buyer could pay
Who can affoard to pay more: A strategic buyer or a financial buyer
Usually a strategic buyer can pay more because they will realize synergies which will offset higher purchase price.
Leveraged Buyout Analysis is considered your _______ valuation.
Floor
How could the 52 week high/low be used to valuate a company?
If an offer price is between high/low, it might not be a competitive offer from point of view of ownership.
What does trading in the middle of the range for a public comparable analysis imply?

The company is appropriately valued.
Why do precedent transactions valuation generally imply a higher valuation?
Control Premium or Synergy Premium for M&A acquisition.
What are the two types of DCF you can do?
- Standalone DCF
- DCF w/ Synergies (assumes acquisition by a strategic buyer)
What is the purpose of a football field chart?
A method to summarize and communicate the numerous valuations for a company.
What are the two questions you must ask when valuing a company?
- What is the company worth (Big 3)
- How much is someone willing to pay? (M+A, LBO)
What type of analysis would you do to calculate a company’s price for an IPO?
Comparable Company Analysis
What is Equity Value?
Value of shareholders’ interest
What does market capitalization refer to:
(Equity Value or Enterprise Value)
Equity Value
What does firm value refer to:
(Equity Value or Enterprise Value)
Enterprise Value
How do you calculate Enterprise Value?
EV = Equity + Det + Preferred Stock + Minority Interest

How does public comparable analysis work?
Determining value via comparison with similar companies
What is a multiple?
A value relationship with Valuation in numerator and Value Driver in denominator.
[Comparable Companies Analysis]
How do you select your comparable companies universe?
- Select Comparable in terms of:
-
Operations
- Products
- Geography
- Customer
-
Financial Aspects
- Size
- Growth (sales, EBITDA, EPS)
- Financial Risk (Leverage)
- Profitability (Margins, Returns)
-
Operations
[Comparable Company Analysis]
How do you assess companies with multiple divisions?
Valuate each division separately.