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MA 2011 BSBA Class 7 Transaction Multiples (2)

MA 2011 BSBA Class 7 Transaction Multiples (2) - 1 BA599...

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BA599 – Mergers & Acquisitions 1 Prof. David Ravenscraft Kenan-Flagler Business School University of North Carolina Class 7: Transaction Multiple Valuation for Adams
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Comparing public and transaction multiples 2 Public firms’ multiples Target firm’s public multiple Acquired firms’ transaction multiple (at price paid) Acquired firms’ public multiple (at pre-ann price) Key issue are firms that stay public similar to firms that get acquired? If acquired firms are better (worse), use more lower (upper) part of distribution. Can test by looking at acquired firms pre-announcement multiple Can match target with acquired firms who have similar pre-announcement multiples Using premium paid avoids all these complications!
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Comparing public and transaction EBITDA multiples for Adams 3 Hershey/Nestle public multi 9.81 or $2.65 bil Acquired firms’ transaction multi 11.05 or $2.98 bil 73 acquired firms public multi 7.69 or $2.08 bil Wrigley public multi 17.95 or $4.85 bil Guess at Adams public multi 11.10 or $3.0 bil 73 acquired firm median premium paid 36.71% or $4.1 bil Public comparable values Transaction comparable values 4.8 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0
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Transaction Multiples for Adams Comparable selection exercise n Using Exhibit 11 and 4a, calculate the transaction comparable enterprise value of Adams n Hint: This is not complicated. Exhibit 11 give multiples. Exhibit 4a gives you the number you apply the multiple to. The result is the estimated enterprise value for Adams n The key issue is which comparable firm(s) do you use and which variable sales or EBITDA. Does it matter? n How do you interpret your findings? n Note, Exhibit 11 give you the multiple & enterprise value, but not sales or EBITDA. It computed the multiple for you. 4
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5 Transaction Multiple Analysis with Small and Large Sample using Excel and Statistic n Key Lessons ¨ The computation and intuition of transaction multiples ¨ The critical link between public and transaction multiples ¨
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