Valuation Methods

The Companies are valued using three valuation methods namely (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions. 

Method 1: Comparable Analysis ("Comps")

Under this method, the company looks at comparable companies that operate in similar industry segment. The comparate data look at trading multiples like P/E, EV/EBITDA, or other ratios. Multiples of EBITDA are the most common valuation method.

Method 2: Precedent Transactions

Under this method, the companies look at the recent merger and acquisition activity. The transaction provide an overview of current fair market value range.

Method 3: DCF Analysis

Discounted Cash Flow (DCF) analysis is an intrinsic value approach where an analyst forecasts the business' unlevered free cash flow into the future and discounts it back to today at the firm's Weighted Average Cost of Capital (WACC).