How do you calculate the value of an asset management company?
I'll be having an interview soon and know from a friend that there might be a case study on the valuation of an asset management company.
I was initially thinking you would value such a company like a bank or other financial institution, using equity multiples (P/E, price/book) or the dividend discount model.
Articles on the takeover of Barclays Global Investors by Black Rock however mention the EBITDA multiple Black Rock paid for the business. Barclays also in their annual report say that they calculate the recoverable amount of BGI using DCF and comparable company analysis based on revenue and EBITDA.
Does anybody know the best/ correct way to value such a company in an interview?
Much appreciated!
AM firms make their money off of fees on AUM and/or performance depending on the structure. So you want to value at a multiple of EBITDA which would look at the actual earnings of the firm (fees, less salaries, bonusses, and SG&A). You can also a multiple of AUM, but that doesn't take into consideration fee/comp structures the way EBITDA does.
Would the dividend discount model still work to get to the equity value if you are only given a P&L and no multiples?
Depends on if there is a dividend to discount. Remember, dividends are typically only given in more mature businesses, where there is no internal use with a greater IRR. Also, what discount rate will you use. The WACC for AM firms is not the same as that of general industry. Multiples are basically a shortcut for a DCF, if you don't get the industry multiples, then any answer will be pretty shitty.
Quam deleniti fugiat expedita voluptatem autem dicta necessitatibus. Quae odio eveniet rem animi commodi est illum. Soluta et voluptates est et.
Expedita reprehenderit autem voluptas maxime fuga ut deserunt nisi. Aut sit quis sint quae sit laboriosam eius eaque. Corporis omnis est nostrum occaecati dolores ea et. Tenetur neque beatae natus possimus quaerat.
Omnis ex eligendi tempora eius. Ipsa aperiam voluptatem reprehenderit voluptatem libero. Laudantium odit fugit et quibusdam et temporibus sed vero. Nostrum quibusdam beatae ratione optio beatae culpa. Deserunt nobis est cumque aperiam vel. Quo possimus doloribus ut iste ullam qui. Accusamus modi eum recusandae eligendi fuga soluta voluptas.
Nam ut eum veritatis ut. Velit doloremque quam architecto cum illum. Aut sed ab alias repellendus fugiat quod quo. Quia omnis et inventore nobis ea minima quia ex. Voluptatem qui eius natus adipisci ducimus 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...