What are the different ways you can calculate the purchase price of a company (in the context of cases)? Do you do an NPV calculation or is it more like using a multiplier for operating profit (I.e ask price = 5x Ebitda) ?
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What are the different ways you can calculate the purchase price of a company (in the context of cases)? Do you do an NPV calculation or is it more like using a multiplier for operating profit (I.e ask price = 5x Ebitda) ?
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Hi there,
Could be either of the two.
The valuation of a company can be conducted with:
If the company is listed on the stock exchange, you may also simply use the market capitalization of the company as a reference.
Hope this helps,
Francesco
Typically in investment, valuation or PE-related cases, there are a few key approaches towards valuing the purchase price of an entity:
If time permits, would be great if you could use more than one of the approaches listed above to triangulate an answer (NPV is a must)
Check out this one: https://www.preplounge.com/en/consulting-forum/valuation-and-ma-cases-1836
Hello!
Agree with Ian, in the context of consulting, NPV is going to cover most of the cases.
Ensure that you are familiar with the normal one (in which they tell you the number of years) and the perpetuity version!
Cheers,
Clara
Hi there,
Most valuation cases are going to use NPV - this should be your default. The alternatives are multiplier (Ebitda times x) and market cap (# shares times share price) but you will generally be prompted/directed to calculate the value this way (i.e. given charts/data that make it clear market cap or a multiplier should be used).
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In case studies, you can for example use the discounted cash flow method to solve valuation cases. You can find modified solution approaches here.