pre vs. post money valuation? purchase price? so confused!

hi team... 1st scenario: assume I am a buyer assessing a potential target. this potential target had a recent financing round and you can see both the pre and post money valuation from the round... which metric (pre or post) would be more relevant for helping me, the buyer, determine how much i should now pay for the business? why? 

2nd scenario: assume me and another buyer are competing for the same asset. i know the other buyer submit a bid for $100M pre and $200M post valuation. if i am trying to decide how much to bid to beat this other buyer and win the asset, should i try to beat the pre100M or post 200m? im assuming pre money is more important in this case? if you can explain "why" that would be great..

thanks everyone!!

Comments (3)

  • Associate 2 in PE - LBOs

1st scenario: Pre-money + investment = post-money. $100 pre, $200 post means you gave the business $100 for a 50% ownership stake.

2nd scenario: You theoretically would want to offer them $101 pre $201 post. They still net $100mm (which ostensibly is their funding requirement). But instead of selling half the business for $100mm, they are now selling slightly less than half.

wallstreetsavage, what's your opinion? Comment below:

Thanks! But for scenario 2 let's assume this is an outright m&a sale. 100% stake. Doesn't that change things? Because we don't want to sell half the business. 

also I'm confused. Another situation. Let's say we are acquiring 100% of company A for total consideration $100M. Pre money valuation is $100m? And post money valuation is $200m? That's so confusing because EV here in the traditional sense is 100m… 

  • Analyst 1 in IB - Gen

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