This PPT slide, part of the 28-slide Guide to Acquisition Strategy and Valuation Methodologies PowerPoint presentation, presents an overview of various valuation methodologies alongside their key sensitivities. It categorizes four primary approaches: Public Market Comparables, Merger Market Comparables, Discounted Cash Flow (DCF), and Pro Forma Analysis. Each methodology is briefly described, highlighting its purpose and the context in which it is typically applied.
Public Market Comparables focus on trading multiples of similar companies to assess relative value within a sector. The effectiveness of this approach hinges on the quality of the comparables, the prevailing market environment, and the consistency of accounting treatments. Forward-looking multiples and reliance on public data also play significant roles in the accuracy of this method.
Merger Market Comparables evaluate the market of comparable transactions, factoring in acquisition premiums. This method is sensitive to the quality of the transactions being compared, historical multiples, and the limited availability of public data. Market conditions at the time of the transaction can greatly influence outcomes.
The Discounted Cash Flow method estimates the present value of projected unlevered free cash flows. Its accuracy is contingent upon the quality of financial forecasts and the assumptions made regarding discount rates. This method is particularly sensitive to the assumptions around future performance.
Lastly, Pro Forma Analysis assesses the potential impact of a transaction on earnings per share (EPS) and considers whether it is accretive or dilutive. However, this method is affected by accounting practices and does not necessarily indicate fundamental value.
Understanding these methodologies and their sensitivities is crucial for making informed decisions regarding valuations in various contexts.
This slide is part of the Guide to Acquisition Strategy and Valuation Methodologies PowerPoint presentation.
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