Trading comps to value a company that just bought a business
Let's say that Company A acquired two months ago Company B. We have 2023E-24E P&L estimates of both companies on a standalone basis. We also have visibility on the historical balance sheets of both companies.
Both companies are close competitors and thus there is no need to do a SOTP valuation as they do almost exactly the same. We get our comps with EV/EBITDA and P/E for 2023E and 2024E.
What EBITDA and Net Income we would use to apply the multiples from the peer group? Should I do a purchase price allocation of the goodwill? Would it make sense to also have EV/Sales multiple? What kind of adjustment(s) would we need to do?
I try to think about Credit Suisse and UBS transaction. If the peer group P/E multiple is 6x (just a guess), the combined LTM Net Income is the highest ever for a bank so the valuation would be huge. Nonetheless the market thinks that this negative goodwill will be less of a benefit for shareholders than what the "P&L accounting terms" suggests. We can tell by UBS' share price...
Would highly appreciate some help on this matter. Thanks a lot in advance.
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