test2 - FBE421 PROFESSOR BRIGGS COMPARABLE COMPANIES...

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8/23/2010 1 FBE 421 P ROFESSOR B RIGGS Comparable Companies Analysis C OMPARABLE C OMPANIES A NALYSIS Summary of Comparable Companies Analysis Comparable companies analysis is one of the primary methodologies used for valuing a given focus company, division, business or collection of assets (“target”). It provides a market benchmark against which a banker can establish valuation for a private company or analyze the value of a public company at a given moment in time. Comparable companies have a broad range of applications, most notably for various mergers and acquisitions (“M&A”) situations, initial public offerings (IPOs), restructurings and investment decisions. Foundation based on a premise that similar companies provide a highly relevant reference point for valuing a given target. Market based approach (versus intrinsic value approach) The Lemming component of any market based approach aka ‘greater fool theory’
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8/23/2010 2 C OMPARABLE C OMPANIES A NALYSIS Summary of Comparable Companies Analysis Valuation metrics may vary by sector although certain multiples tend to be the most widely used Determine perspective (equity investment versus enterprise level) Enterprise examples EV / Revenue EV / EBITDA EV / EBIT Equity Examples P / E (the most broadly recognized in circles outside of Wall Street) Why EV multiples tend to be more commonly used? Capital structure agnostic (“we can always recap to an optimal structure”) C OMPARABLE C OMPANIES A NALYSIS Overview of step by step approach Step I Select the Universe of Comparable Companies Step I. Select the Universe of Comparable Companies Step II. Locate the Necessary Financial Information Step III. Spread Key Statistics, Ratios, and Trading
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test2 - FBE421 PROFESSOR BRIGGS COMPARABLE COMPANIES...

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