How to value equity of non-public company?
How would I value the equity of a non-public company? Do you just take its enterprise value then add cash and subtract debt?
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which is also how you value a public company...so yes
Use comparable companies analysis to extrapolate a comparable beta. Then unlever the beta, then relever it at the targets specific capital structure. Apply that beta to your CAPM equation; this will give you cost of equity. Then take the current yield of outstanding debt to find cost of debt. Then apply the weights of each to find WACC. don't forget to multiply the cost of debt by 1-t to account for the tax shield of debt. Then apply this as your discount rate to forecasted free cash flows and terminal value. NPV of this will be enterprise value. From here, subtract debt, minority interest, non controlling interest, and add cash.
^perfect answer
Use comparables, look at the Equity value/Net income multiple, multiply the company's net income by the multiple.
Don't forget your size premium!
Ah of course! How could I forget the size premium from CAPM! Good catch!
second question, how do you find the cash flow of a private company?
I would approach it in one of two ways:
1) If financial statements are available, use those (not trying to be a smartass)
2) Take you list of comparable companies and narrow it down to the 2-3 that are most comparable. Then, use those companies as a base for your cash flow projections. Then, adjust those projections to reflect differences in your private company from the public comps. You should adjust up or down for facets such as capital structure, operating leverage, economies of scale, company size, supply chain risks, and growth rates of various metrics.
i was just being an ass and making a joke. TO be honest, the 2nd method would never work because you have too many variables already in a DCF and now you are applying even more? lol
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