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Francesco

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Equity Value of a Private Company

Hi

What is the equity value of a private company in a transaction (i.e. for an LBO)? For a public company, it is [share price * shares outstanding]. However, if we just take the value of the equity from a company's Balance Sheet, this would not reflect the market value. Would we just apply a multiple for a private company (e.g. 10x EV/EBITDA) and then subtract net debt to derive at the "market value" of the private company's equity value?

Thanks a lot! :)

Hi

What is the equity value of a private company in a transaction (i.e. for an LBO)? For a public company, it is [share price * shares outstanding]. However, if we just take the value of the equity from a company's Balance Sheet, this would not reflect the market value. Would we just apply a multiple for a private company (e.g. 10x EV/EBITDA) and then subtract net debt to derive at the "market value" of the private company's equity value?

Thanks a lot! :)

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Book a coaching with Francesco

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Hi there,

to calculate the equity value you could either use a multiple as you suggested or a DCF method. Alternatively, you could also derive the value from the fair value of assets subtracting the net debt, however this is not going to give you the market value, but rather the liquidation value of the company.

Best,

Francesco

Hi there,

to calculate the equity value you could either use a multiple as you suggested or a DCF method. Alternatively, you could also derive the value from the fair value of assets subtracting the net debt, however this is not going to give you the market value, but rather the liquidation value of the company.

Best,

Francesco

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Hi,

You can either use multiples of the public companies, or the multiples of similar deals or DCF model to do the valuation. Usually, both are used.

Best

Hi,

You can either use multiples of the public companies, or the multiples of similar deals or DCF model to do the valuation. Usually, both are used.

Best

Book a coaching with Luca

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Hello,

The most used valuation methods in case interviews are the following:

  • DCF analysis
  • Multiples
  • Market value, if public

Best,
Luca

Hello,

The most used valuation methods in case interviews are the following:

  • DCF analysis
  • Multiples
  • Market value, if public

Best,
Luca

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Agree with others,

Best,

André

Agree with others,

Best,

André

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Book a coaching with Udayan

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A few alternatives to using multiples - which as others have pointed out is the easiest way

1. Look at any previous funding rounds - you have to disclose valuation whenever you raise funding. You can apply any reasonable assumptions to this value to arrive at current value

2. Find comparable companies that recently went public and use that as a benchmark for valuations (e.g., what their P/E and other relevant rations are)

3. Value of any company that was recently acquired - although note that that will be a value not of the private company intrinsically but of what the private company could fetch in an M&A process

Hope this helps and all the best

Udayan

A few alternatives to using multiples - which as others have pointed out is the easiest way

1. Look at any previous funding rounds - you have to disclose valuation whenever you raise funding. You can apply any reasonable assumptions to this value to arrive at current value

2. Find comparable companies that recently went public and use that as a benchmark for valuations (e.g., what their P/E and other relevant rations are)

3. Value of any company that was recently acquired - although note that that will be a value not of the private company intrinsically but of what the private company could fetch in an M&A process

Hope this helps and all the best

Udayan

(edited)

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Hello,

Agree with the others.

However, it seems unlikely to me that they would ask you this question in a MBB interview.

The only scenario is maybe an M&A, but there you would use also the synergies multiplied per an agreed number.

Cheers,

Clara

Hello,

Agree with the others.

However, it seems unlikely to me that they would ask you this question in a MBB interview.

The only scenario is maybe an M&A, but there you would use also the synergies multiplied per an agreed number.

Cheers,

Clara

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Hi there,

Yes, multiples are the common way to do this. Use multiples for comparable companies/deals, and then subtract debt.

Best,

Emily

Hi there,

Yes, multiples are the common way to do this. Use multiples for comparable companies/deals, and then subtract debt.

Best,

Emily

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Agree with others: use multiples or DCF.

Agree with others: use multiples or DCF.

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