Day 1 - Valuation Overview and Comparable Valuation

Day 1 - Valuation Roadmap

The session lays the foundations to build a solid understanding of corporate valuation in the context of investment banking. The most common valuation methodologies are introduced, explaining the difference between a company's fundamental value, and how much an acquirer  would pay for the business. The concepts of enterprise value and equity value are explained, using simple but rigorous exercises. Finally, the basics of multiples valuation and discounted cash flow valuation are introduced. Exercises are used throughout the session.

Key topics:

• The importance of valuation in the investment banking industry
• Fundamental value versus how much an acquirer will pay
• Overview of the major valuation methods
• Trading comparables analysis
• Discounted cash flow analysis
• Transaction comparables analysis
• LBO analysis
  • Enterprise versus equity value
  • Book values versus market values
  • How to calculate enterprise value using market values
  • How to calculate enterprise value using a fundamental valuation approach

Day 1 - Trading Comparables

Participants are introduced to preparing multiples using real company data and a case study including a range of international companies.  We focus on how to select comparables, where to find data in published financial data and equity research reports, how to clean the raw data, and on documenting and checking the output. The most commonly-used multiples are explained and complexities such as normalizing for non-recurring expenses/income are also covered. The session ends with practical exercises on the application of multiple analysis to value a company.

Key topics:

• Screening companies to identify a suitable comparable set
• Calculating the company’s value
  • Number of shares and value of share options
  • Equity value
  • Net debt calculations
  • Minority interests and equity method investments
  • Enterprise value
• Calculating the earnings numbers
  • Cleaning non-recurring items from earnings and resulting tax adjustment
  • Calendarization issues
  • Last-twelve months analysis
• Calculating a range of forward looking and historical earnings multiples
  • Revenue
  • EBITDA
  • EBIT
  • PE
  • PEG
  • Industry-specific multiples
• Calculating and using operating and credit ratios
• Troubleshooting and checking the output
• Applying the results