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Best Practices for Due Diligence and Valuation in M&A

Sun Acquisitions

Assess the company’s financial performance, including revenue, profitability, and cash flow. Common Valuation Methods: Comparable Company Analysis: Compare the target company to similar publicly traded companies. Discounted Cash Flow (DCF) Analysis: Projects future cash flows and discounts them to their present value.

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Methods and Examples on How to Value a Company

Lake Country Advisors

Market Capitalization Market capitalization is one of the simplest and most commonly used methods for valuing a publicly traded company. Example Scenario: Suppose XYZ Corp is a publicly traded technology company with 50 million shares outstanding, and the current share price is $20.

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M&A Blog #14 – valuation (roles, types, equity & enterprise values)

Francine Way

The challenge is: the firm’s value is not obvious or available - there is not one “true” or “correct” firm value, as any valuation is based on unknowns (future performance and future cash flow). Do they have the cash of debt/equity capacity to bid aggressively? It is no different in M&A. It drives prices, ROI, and financing.

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Understanding Valuation Techniques in Mergers and Acquisitions

Sun Acquisitions

This approach relies on analyzing the market value of comparable publicly traded companies, known as guideline companies or multiples. Income-Based Valuation The income-based valuation method focuses on the target company’s ability to generate future cash flows and assesses the present value of these cash flows.

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Mergers and Acquisitions Valuation Strategies: Unlocking the Secrets to Successful M&A Transactions

Sun Acquisitions

Comparable Company Analysis (CCA): CCA involves comparing the target company to similar publicly traded companies. CTA provides a more industry-specific perspective and is useful when there are limited public comparables. It involves forecasting cash flows and applying a discount rate.

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Buy Side M&A Blog Series - Vol 7 - Valuing The Target

RKJ Partners

Below are the six recognized methodologies with short explanations of each: Discounted Cash Flow (DCF) Analysis: This analysis derives an ‘intrinsic’ value of a company. This means that the method evaluates the future cash flow of the company and then discounts those cash flows to the present day.

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