Technical Help

I'll take a shot at Question A:

Professional services is more cyclical than manufacturing: you don't need your bankers to advise an M&A, but people do need some dough (or cars, who knows). This is on a relative scale. Discount rate wise A and B's should differ by too much.

EV: B likely has a higher EV, but lower EBITDA due to A's heavy depreciation and likely more debt and therefore higher interest expense. 

So B probably has a higher EV/EBITDA multiple. 

Let's say A is a manufacturing company and B is a professional services company. A is asset-heavy and B is asset-light. The profit margin is likely higher for B. When you calculate FCFF, B has a higher net income to start with. When you add back depreciation, which is a big part of company A, you see a bump in FCF, and then you need to subtract CapEx, which consists of buying new equipment and maintaining current equipment. This is higher for company A, and almost 0 for company B. Then you subtract ONWC, which is likely higher for company A because as a professional services company I just don't see why you need too much NWC (investment banking is also professional services). 

Take this with a grain of salt. I can be completely wrong because I mainly work with healthcare companies, and I pay attention to tech, not business services or industrials.

If you have Bloomberg, just pull comps and check industry average or median. 

I believe the above analysis is correct? 

EBITDA Multiples by Industry | Equidam