Business Valuation#
Purpose of Valuation#
- Mergers and acquisitions
- Sale of business
- IPO preparation
- Dispute resolution
- Loan security
- Family settlement
Valuation Methods#
1. Discounted Cash Flow (DCF)
- Future cash flows projected
- Discounted at WACC
- Terminal value added
2. Comparable Company Analysis
- Compare with similar listed companies
- Apply multiples
- EV/EBITDA, P/E multiples
3. Asset-based Valuation
- Net asset value
- Liquidation value
- Asset replacement cost
4. Revenue-based
- Times revenue method
- Industry-specific multiples
Key Metrics#
| Metric | Formula |
|---|---|
| EV | Market Cap + Debt - Cash |
| EBITDA | EBIT + Depreciation + Amortization |
| WACC | Cost of Equity × E/V + Cost of Debt × D/V |
Process#
- Understanding business
- Financial analysis
- Choosing valuation method
- Applying method
- Conclusion and report
Valuation Premise#
- Going concern
- Liquidation
- Orderly disposal