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1-31 - • AVG bidder gives away all their synergies •...

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1/31 V. Interpreting Multiples Readings: Luehrman- Corporate valuation and market multiples See assignment 2 Public multiples as benchmarking when target is public o Case 1: target above comparable firm- target outperforming In DCF use aggressive assumptions o Case 2: target at comparable level- average target performance o Case 3: target below comparable firm: target underperforming In DCF use conservative assumptions o *** DO NOT SAY OVER OR UNDER VALUED Transaction comparables using accounting multiple o Premium paid: 100*(price paid - preann price) / preann price Is an estimate of synergies the bidder gives to target
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Unformatted text preview: • AVG. bidder gives away all their synergies • BEST COMPARABLE NUMBERS (note: EV/EBITDA, EV/SALES are garbage) • Main problems: If public target, be careful that target stock price doesn't contain any rumors of a possible deal If private target, what is the stand alone value to use with premium paid • To fix transaction accounting multiples use: Public transaction multiple: multiple for acquired firm where EV is calculated based upon the preann price and not the price paid Match the comparables firms with the target based on their preann multiple...
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