Day 102 in MIT Sloan Fellows Class 2023, M&A and PE "Valuation"
When a company buys a target, there are many ways to offer your target.
In this blog, I will write down who the stakeholders are and what typical questions they have.
Stakeholders and questions about valuation
- Shareholders of target companies
- Is it a fair price to justify selling?
- Even is it an adequate price to sell?
- Target board members
- Is it a fair price to justify selling?
- Target mgmt
- Can I remain on the board? What is my next position?
- Buyside shareholders
- Share exchange or cash?
- Is it a worthwhile acquisition?
- Did you do the best to buy a company?(for whom?)
Valuation
Recent share price range
- easy to collect data
- only applicable for public companies
- black box
Trading multiples
- Several ways to do (EV/EBITDA, EV/EBITDA adj CapEx, P/E, Forward multiples)
- Depends on public pure boys
- sometimes difficult to find (growth rate, size, positioning, portfolio)
- Need to fulfill conditions/restrictions
- Pick up an appropriate methodology
Projected equity
- Get the share price with future P/E multiple
Transaction multiple
DCF
- A lot of subjective information
- transparent
- EV is normally calculated by multiple
The methodologies above, the only DCF is measuring the value of companies. Other methdologies are just checking how the market evaluates the company.
