Practice
Valuation · Conceptual
Debunk the myth that Enterprise Value represents the "true cost to acquire a company."
Why do you 'calendarize' companies with different fiscal year-ends before comparing their multiples?
How does a Dividend Discount Model (DDM) differ from a DCF, and when is it most useful?
A company issues $150M of Preferred Stock to fund a $150M Common Stock repurchase. How do Equity Value and Enterprise Value change, and why is this a useful counter-example to the "Net Assets" shortcut?
What is a precedent transactions analysis and how does it differ from a comparable companies analysis?
Why look at both historical (LTM) and projected (forward) multiples in a Comps analysis, rather than just one?
Why does Goodwill never get subtracted in the Equity Value to Enterprise Value bridge?
What are the tradeoffs between TEV/EBITDA, TEV/EBIT, and P/E as valuation multiples?
An acquirer buys 65% of a company for $500 million. How do you use this to calculate the deal's valuation multiples?
How can an LBO analysis be used as a standalone valuation check, separate from its use as a private equity returns model?
Why is it invalid to pair plain Net Income with (Equity Value + Preferred Stock), even though the numerator and denominator technically "match" mathematically?
Why do you typically use median multiples rather than average multiples when summarizing a set of Comps?
Why might you use an M&A Premiums analysis to value a company, and what's a key limitation?
Why do you subtract only the Net Operating Losses within a company's Deferred Tax Asset, not the whole DTA, when calculating Enterprise Value?
What is a Liquidation Valuation, and why does it usually understate the value of a healthy, growing company?
Why is it not arbitrary to pair Net Assets with Common Shareholders (Equity Value), but Net Operating Assets with All Investors (Enterprise Value)?
Could a company's Implied Equity Value or Implied Enterprise Value ever be negative?
Why do you need both Equity Value and Enterprise Value instead of just one?
How do you decide whether to pair a valuation metric with Equity Value or Enterprise Value?
How do you pick comparable companies for a comps analysis?
What's the core difference between an intrinsic valuation method like a DCF and a relative valuation method like Public Comps?
What's the difference between Basic Equity Value and Diluted Equity Value?
Why would you use EV/EBITDA instead of P/E as a valuation multiple?
What are the advantages and disadvantages of a Sum-of-the-Parts valuation?
Should you generally include expected synergies from a deal when calculating Precedent Transaction multiples?
Are there rules about including deals for less than 100% of a company, or about stock vs. cash consideration, when building a set of Precedent Transactions?
What is a comparable companies analysis?
What is the 'Football Field' chart used for in a valuation, and why use a range instead of a single number?
Why do you typically look at both a sales-based multiple and one or two profitability-based multiples in Comps and Precedent Transactions, rather than just one?
Why do you subtract Equity Investments but add Noncontrolling Interests when moving from Equity Value to Enterprise Value? Why do the two adjustments point in opposite directions?
What's the difference between equity value and enterprise value?
Walk me through how you'd calculate enterprise value from equity value.
Why do you subtract Cash when moving from Equity Value to Enterprise Value? Is it because Cash is "the opposite" of Debt?
Walk me through the four steps of a Public Comps analysis.
Debunk the myth that Debt "adds to" Enterprise Value and Cash "subtracts from" it.
A company issues $100M of Debt and does nothing with the proceeds. How do Equity Value and Enterprise Value change?
What do Equity Value and Enterprise Value actually mean? Don't explain how to calculate them, explain what they mean.
Why do Precedent Transaction multiples tend to be higher than Public Comps multiples for similar companies?
Why should you never screen Comparable Companies using both a financial metric (like Revenue) and a valuation metric (like Enterprise Value) at the same time?
Two companies have the same amount of Debt, the same Operating Income, the same tax rate, and the same Equity Value, but one has Convertible Debt and the other has traditional Debt. Which company has the higher P/E multiple, and why?
Why doesn't Enterprise Value actually hold up as fully "capital-structure-neutral" in real life?
What are the main ways Precedent Transactions differ from Public Comps in how you screen and calculate them?
What does it mean if your target company's growth rates and margins are in line with its Comps, but it trades at noticeably lower multiples?
How do you build a Future Share Price Analysis, and when is it useful?
Why do you always use a company's Current Equity Value or Current Enterprise Value in Comps multiples, never a 'projected' future value?
Could a company's Current Equity Value ever be negative? Could its Current Enterprise Value?
A CEO finds $200M of cash on the street and deposits it in the company's bank account (ignore taxes for simplicity). How do Equity Value and Enterprise Value change?
What are the three main valuation methodologies?
A company announces it now expects 20% revenue growth instead of 10%. How does this affect its Current and Implied Equity Value and Enterprise Value?
Why would a company's own management team view the same Football Field differently than a hostile acquirer would?
A company has excess Cash. How do Equity Value and Enterprise Value change if it uses the cash to repay Debt versus repurchase Common Stock?
Why do you never project Equity Value or Enterprise Value forward when calculating forward multiples?
Why is it harder to draw clean conclusions from Precedent Transaction multiples than from Public Comps multiples?
Why are valuation multiples and growth rates often not as correlated as you'd expect, even among similar companies?