Hey guys, I have a PE interview where I have been tasked with writing up a paper on whether or not a tiny public, but very high growth company (50% to 10% YOY revenue growth for next 5 years) is a good candidate to acquire. I had a few questions
1. What is an appropriate discount rate for a small business? (Given you know nothing about the company and it is 100% equity), I assumed 20%
2. What is a good Perpetuity Growth Rate? Given this highly growing company, I said 4%
3. What is an appropriate EBITDA multiple for businesses with a $50MM EV? There are literally 0 comps for this company as it is very unique.
4. What would your shareholder premium be?
I understand that each industry and business has its own appropriate valuation metrics, but if you were to look at a general $50MM company, what discount rate, growth rate, exit multiple, and share premium would you guys use?
0 comps? Perhaps the answer is no.
Bad jokes a side, I'd be interested in learning how to answer a question like this
I looked up the company on Hoover to try to find SIC/NAICS numbers for comps, but it is classified under something completely irrelevant/ambiguous.
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