Private companies valuation - “optimal” capital structure

Hey guys, that’s my first post - hope this question hasn’t ben raised & solved already in other topics, in case just let me know which one.

Context: WACC calculation for the valuation of a private company.

As I understood from multiple trainings, videos and books, for the % weight of market value of debt and equity it is commonly used the mean or average of public comps’ related capital structure.

However, this “choice” relies on 2 “big” assumptions:

1) The public comps’ are closed to have the REAL optimal capital structure

2) The target private company will tend in the short term to the optimal capital structure as defined here above

But these assumptions may have some flaws, here some thoughts:

1) What happens if the comps in your peer group have completely different capital structures and no pattern emerges? In this scenario the average or mean figure is not really insightful

2) What happens if we don’t have control over changing the target company capital structure (e.g., valuing a non controlling investment)? In this scenario I think it’s not quite accurate to assume a different capital structure than the target company’s current one

3) What happens instead if we find the “optimal” capital structure based on public comps but then we notice that is completely different from the target company current one? (e.g., optimal 40% equity 60% debt and current 100% equity 0% debt)

Just to summarize I wanted to ask you whether in practice it is common to blindly follow the rule of averaging the public comps figures or if it ever happened to you to make some (big) assumptions based on the specific context (and if you can provide me some brief example of the situation).

Thanks in advance guys!

Emanuele

1 Comments
 

Atque non voluptas aut consequatur aut dolorum. Quisquam et ipsam totam voluptas. Rerum neque accusamus quis numquam officiis cupiditate veritatis.

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Career Advancement Opportunities

October 2026 Investment Banking

  • Evercore 01 99.5%
  • Moelis & Company 01 99.0%
  • JPMorgan 01 98.4%
  • Guggenheim Partners 02 97.9%
  • Morgan Stanley 06 97.4%

Overall Employee Satisfaction

October 2026 Investment Banking

  • Moelis & Company No 99.5%
  • Morgan Stanley 02 99.0%
  • Evercore 01 98.4%
  • Banco Santander 02 97.9%
  • BMO Capital Markets 13 97.4%

Professional Growth Opportunities

October 2026 Investment Banking

  • Evercore 01 99.5%
  • Moelis & Company 01 99.0%
  • Morgan Stanley 05 98.4%
  • Goldman Sachs 01 97.9%
  • JPMorgan No 97.4%

Total Avg Compensation

October 2026 Investment Banking

  • Vice President (16) $429
  • Associates (57) $264
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (28) $184
  • Intern/Summer Associate (16) $161
  • 1st Year Analyst (84) $151
  • Intern/Summer Analyst (76) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
kanon's picture
kanon
99.0
3
Secyh62's picture
Secyh62
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
GameTheory's picture
GameTheory
98.9
7
DrApeman's picture
DrApeman
98.9
8
Betsy Massar's picture
Betsy Massar
98.9
9
CompBanker's picture
CompBanker
98.9
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”