Valuation via comparables Flashcards
Steps for comparable company analysis
select all comparable companies, locate financial information, calculate key statistics, benchmark comparables, determine valuation.
how to calculate equity value
share price x fully diluted shares outstanding
how to calculate fully diluted shares outstanding
basic shares + inthemoney options + inthemoney convertible securities
Treasury stock method for options and warrants
assuming inthemoney options exercised at strike price. Use proceeds from options to repurchase shares at current price.
If converted method for convertible securities
holder can convert debt to equity at given conversion price, treated as equity for comparable analysis.
Net share settlement method for convertible securities
Issuer can satisfy face face of inthemoney convert with at least some cash.
what is enterprise value and how to calculate
Valuation method showing interest of both debt and equity shareholders. EV= equity + debt + preferred stock + NCI - cash and cash equivalents
Pro’s of valuation via comparables
forward looking, easy, quick, convenient, easily updated
Con’s of valuation via comparables
Influenced by market dynamics, requires comparables, may be disconnected from companies based on cash flows. May not account for company specific factors.
Precedent transaction analysis
similar to comparables, emphasis on recent transactions.
Fixed exchange ratio structure
offer price per share moves in line with acquirer price at a given exchange ratio
Floating exchange ratio structure
set price per share for target shares compared to acquisition shares. prices and amount of shares fluctuate.
how to calculate share premium
(offer price/ unaffected price) - 1
what is a synergy
cost savings, growth opportunities or other financial benefits. Larger synergy leads to larger purchasing price.
