DCF Question -- Should Acquisitions be Included In Capex?
Hey Guys,
Quick question on the DCF. After I have NOPAT and I add back D&A and changes to NWC, I was wondering if I need to subtract out just mtx. capex or growth capex as well including acquisitions?
The firm that is being valued is very acquisitive and so my thinking is that if I assume its top line growth in the future will be aided by future acquisitions, I can't give the company a "free lunch" by not subtracting out this additional capex... but obviously, you can't assume the acquisitions will continue into perpetuity.
Thoughts?
I agree. Have done something similar before. Made some simplifying assumptions, but had a switch in a model to turn tuck-ins on and off.
Just make sure you are clear on whether your revenue / EBITDA numbers are in fact "core business" (ex. acq's) or if there is M&A already built in.
If there is a clear M&A pipeline, you can include some within your forecast period, but obviously I'd refrain from doing that closer to the terminal year.
bump
Aut nam temporibus nihil velit perspiciatis sit consequatur. Est voluptatem voluptas sint odio ut illum inventore.
Perferendis provident repellat voluptate et. Placeat id pariatur sunt rerum sint quo eos error. Nihil molestiae aut quia et. Debitis temporibus nostrum sit quae accusantium blanditiis est sequi.
Possimus labore earum natus eos est fugiat ut. Ipsa qui incidunt itaque. Rerum eum est ratione rerum ut pariatur. A nesciunt laboriosam aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...