What are the valuation methods for an M&A / Investment related case?

M&A
New answer on Aug 25, 2021
3 Answers
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Anonymous A asked on Aug 24, 2021

Hi,

May I know what are the common valuation methods that are used or we can suggest in an M&A or investment-related case?

When or how can we use them? For example NPV, etc.
 

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Ian
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updated an answer on Aug 24, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

The most common is NPV. You can also take market cap/value (share price times shares). The default for M&A is NPV.

Here are some helpful Q&As on the topic:

https://www.preplounge.com/en/consulting-forum/valuing-a-company-10550

https://www.preplounge.com/en/consulting-forum/technical-interview-about-ma-wacc-formula-for-a-private-company-9921

https://www.preplounge.com/en/consulting-forum/investment-cases-ma-pe-hf-differences-9236

https://www.preplounge.com/en/consulting-forum/private-equity-value-creation-interview-what-to-expect-and-how-to-structure-answers-8871

https://www.preplounge.com/en/consulting-forum/upcoming-big-4-ma-carve-outpmi-interview-10418

(edited)

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Shovik replied on Aug 24, 2021
Experience in Big4 consulting and an Asian boutique strategy firm

The two most common valuation methods are 

  1. Discounted cash flow method: Estimate future cash flows of the company and discount by the weighted avg. cost of capital (WACC)
  2. PE multiple: Estimate PE ratio (competitor or other closely related company) and multiply estimated earnings of your company with the PE ratio
     
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Agrim
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replied on Aug 25, 2021
BCG Dubai Project Leader | Learn to think like a Consultant | Free personalised prep plan | 6+ years in Consulting
  1. NPV / DCF (Net Present Value or Discounted Cash Flow)
  2. EV/EBITDA multiples based on similar companies
  3. P/E multiples based on similar companies
  4. Dividend discount model

Happy to give you a step-by-step walkthrough of NPV over DM. Feel free to message me.

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Ian gave the best answer

Ian

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