Question: You need to value a privately-held company and can ask them 5 questions about their financials? What do you ask?
My answer: EBITDA, Revenues, Operating expenses, Projected growth, Debt-to-Equity ratio
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-Ask for EBITDA and it's CAGR over a certain historical period
-Ask for CapEx.
-Ask for historical current assets / current liabilities line items
From this I think you can create a quick-and-dirty DCF valuation by determining EBITDA as your CF proxy, less year over year changes in WC, less Capex to get FCF and then discounting it and only ask three questions
I'm guessing here...someone correct me?
I'd ask for EBITDA, revenue, CapEx, growth projections and D/E ratio - that should give you everything you need to reasonably approximate FCF. D&A and CapEx are generally close to each other so you can guesstimate from that to back into operating expenses if you have EBITDA and revenue, so you should be good to go if you assume D&A=CapEx. The D/E ratio will obviously help with the WACC portion of the DCF, or if you want to use comps you can base off EBITDA.
If you're looking at middle market M&A valuations, you shouldn't need any info related to the current capitalization structure as the future buyer will their own capitalization structure in place. Revenue / Gross Profit / EBITDA / CapEx / Working Capital would be fine for me. Also, if you have a full business description you can likely get a pretty strong idea of the other four metrics with just the revenue.
There is no one best answer to the question. Just have a rationale for your choices. It would probably make sense to ask your interviewer for clarification on what purpose the valuation is being used for. A PE shop has no use for a DCF and a corporation has no use for a LBO.
The context was a small cap biotech company that a PE shop would be buying.
i would ask why the hell a pe shop would buy a small cap biotech firm
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