Sample LTM calculation and calendarization

Hey guys,

1) Lets assume you prepare precedent transaction comps and you calculate LTM figures for the targets. You have two acquisitions, both announced on 15 October 2011 (targets A and B). A has its FY ending 31 December, B April 30.

For A you calculate LTM EBITDA by calculating: 2010 EBITDA + Jan to Sep 2011 EBITDA - Jan to Sep 2010 EBITDA

What do you do for Company B? You just have the EBITDA figures for its quarters ending in April, July, Oct, Jan.

Would you use 2010 EBITDA + Apr to Jul 2011 - Apr to Jul 2010 as a good LTM proxy? But actually, the LTM should end in September, right?!

I would suggest adding an additional 2/3 * Aug to Oct EBITDA 2011 and subtracting an additional 2/3 * Aug to Oct EBITDA 2010 to the formula mentioned above (partial calendarization method). Is this correct and what is the industry practice?

2) Another question: Do you use the calendarization method at all, if a company has its FY ending in either, March, June, September or December and you want to calendarize to 31 Dec?

Because in this case, for a company with FY ending in March, you could just add the relevant quarters (Q1 2010 + Q234 2011) and have the exact Jan-Dec Sales opposed to a proxy using e.g. 3/12 2010 Sales + 9/12 2011 Sales .

I'm a little bit confused and really appreciate your effort!

Thanks.