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Advanced Valuation Skills - Market multiple issues

Market multiples appear to be so simple: choose a few comparators, look up their EBITDA multiples on Bloomberg or Capital IQ, take an average and multiply it by our target firm's EBITDA. Subtract debt, and we have our valuation.

If we're using multiples as a cross-check, or for an M & A preliminary price indication, we might not need to go further into detail, but if we're using multiples as our primary valuation method, we may be obliged to scratch a little deeper ... and then, as we say, "the devil is in the detail".

So, apart from the obvious difficulties of finding a market proxy or benchmark for the firm we are valuing, a refined application of the market method can provide the practitioner with hours of fun and games, and that is before we even start to synthesise the usually conflicting output figures into a credible value range.

Modules include:

  • Choice of multiples
  • Maintainable EBIT extraction
  • Debt monitoring
  • Calendarisation
  • Prospective figures
  • Price # durable value (spikes and troughs)
  • Currencies
  • Associates
  • Recent acquisitions
  • Preference shares and minority interests
  • Dilution and option overhangs
  • Value synthesis

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