Are there any specific valuation techniques or formulas I should prioritize for investment banking interviews?
JPMorganChase | CFA® Charterholder | IIFT Delhi (MBA Silver Medalist, Rank-2) | BITS Pilani | DPS (Gold Medalist)
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In investment banking interviews, it's important to be well-versed in the three main valuation techniques: Comparable Company Analysis (Comps), Precedent Transactions, and Discounted Cash Flow (DCF). For Comps, you compare the target company to similar publicly traded firms using multiples such as EV/EBITDA, P/E, or EV/Sales to estimate its value. Precedent Transactions involves analyzing historical M&A deals to understand the multiples paid for similar companies in the past. DCF, on the other hand, calculates the present value of a company's future cash flows, which requires you to project cash flows and discount them using the Weighted Average Cost of Capital (WACC). You should be comfortable with the formulas and assumptions behind each method, as well as how to interpret the results to provide a well-rounded valuation analysis.
Hello there,
Thank you for your question! For investment banking interviews, we'd recommend to focus on the following three valuation methods:
- Comps – Compare similar public companies using valuation multiples like EV/EBITDA or P/E. This gives a quick market-based benchmark.
- Precedent Transactions – Analyze past M&A deals for similar companies to see what buyers have paid in real transactions.
- DCF (Discounted Cash Flow) – Project future cash flows and discount them to present value using WACC. This is more detailed but crucial for fundamental valuation.
If you understand these and when to use each, you’ll be well-prepared! We wish you much success for your interviews! ?
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