Hi guys, working on a deal where the sponsor is acquiring a company that has stakes between 21-49% in various companies. The company has rolled up the profits from these equity-accounted associates into operating profit (which in my experience is wrong) and expects the sponsor to pay a multiple for the entire thing. I'm thinking of modelling the valuation such that the EBITDA is representative only of the core business (i.e. excluding the associates contribution) and structuring it such that the associate holdings are transferred at the corresponding percentages of equity value of these associate companies (meaning an independent valuation of these stakes would be needed).
Am I thinking about this the right way? Any insights would be appreciated, thanks.
Bump!
why not base the price of a net income multiple like (p/e), becuase then you get the effects of the associate holdings without it being in EBIT since it is not core operating
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