dcf implied exit multiple

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Discounted Cash Flow Analysis

Discounted Cash Flow Analysis

…uity growth rate is the rate at which the economy is expected to grow, this is normally 2.5% or 3% Make sure the implied exit multiple isn’t too high, since that probably means your assumptions are too aggressive in the terminal year. Another way of “judging” if this value is too high, is if you put it in the relation of the later calculated enterprise value. If the terminal value is more than 80% of the enterprise value, it is…

Leveraged Buy Out Valuation

…lue using the Gordon growth formula is calculated. The terminal value is equal to the EV at the expected year of exit. To find the value of the equity at the expected year of exit simply deduct debt from EV. The IRR is calculated using the value of equity at entry and the value of equity at exit. While it is possible to use the Gordon growth formula for simplicity, practitioners would likely use an exit multiple based on comparable companies to f…

LBO Model

…s USES: Enter the acquisition price, in this example we were offered to buy this company for 17.5 million which implied a 6.7 EV/EBITDA multiple INPUT: What leverage will your acquisition have? We have chosen to borrow 4 times EBITDA, which is a moderate level. In our example, this implies 60% of total uses implying that we need to add 7 million equity in order to fund this LBO. Enter the interest rate at which you can borrow money at. We got a…

Leveraged Buy Out Model

…amp;D and working capital discipline • Increased firm value through EBITDA growth between time of investment and exit. Possible through sustainable earnings growth, cost control and possibly restructuring upside or synergies with other companies in the portfolio of the financial investor • Increased firm value through multiple-expansion between time of investment and exit. Driven by evolving industry fundamentals (e.g. cyclicality of industry), q…

Comparable company analysis

…is important that the performance measure is proportional to value. Valuing a company solely based on peer group multiples is problematic. One has to find a group of companies with similar growth prospects, profitability and level of risk. Thus, multiple valuations (comparable company analysis) are to be seen more as a complement to the DCF (APV) and the LBO valuations than an actual assessment of the value. Comparable company analysis (trading c…

Precedent transaction valuation analysis

…is important that the performance measure is proportional to value. Valuing a company solely based on peer group multiples is problematic. One has to find a group of companies with similar growth prospects, profitability and level of risk. Thus, multiple valuations are to be seen more as a complement to the DCF (APV) and the LBO valuations than an actual assessment of the value. Precedent transaction analysis It is common that practitioners use m…