valuation method taught at uni vs. valuation method taught at IB
In a finance degree at uni they teach you how to value a company.
When you start working at an investment bank, the investment bankers will teach you how to value a company.
Did you find that the way that university taught you how to value companies is 'correct'?
If you think that uni wasn't correct, what is different about the way investment bankers actually value companies (compared with the university method)?
These are 2 questions for someone who has both majored in finance at university and has experienced working in mergers and acquistions at an investment bank.
I'm having trouble answering these questions of mine because I haven't studied a finance degree at university and I know I don't understand how investment bankers value a company, how they come up with the ultimate selling price.
Thanks for reading and for any replies in advance!! I appreciate anything you could share with me no matter how small.
In my opinion, there is no 100% correct valuation method. All models have their pros and cons. University teaches you the theoretical way and the foundations you need to understand how and why specific valuation methods are performed.
However, in real life, a valuation can differ and is sometimes more like wizarding. You tend to simplify things for time reasons, and the client doesn’t want to take hours just to understand your black-scholes, schwarz-moon model, etc.
Another important factor is the human component of a deal. The sell-side tries to maximize the valuation while the buy-side tries the opposite, and mostly, they meet somewhere in between.
Further, sometimes the seniors just tell you the multiple range they want to see, and you adjust the valuation model and peers until you receive the desired outcome.
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