I am in the middle of a deal, and have identify the following ones (deal is TMT): 1. CAGR Revenue 2. EBITDA Margin 3. Capex 4. Exit Multiple
Are those correct ? Which other ones you normally test? Would those differ for sectors?
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Off the top of my head, you could also sensitize interest rate (or if this is an LBO, how much leverage is available in the first place) or changes in working capital.
Thanks for the answer - it makes sense. More generally, what approach do you use to identify which metrics to use? Not only for TMT, but also for other sectors.
You can sensitize literally any input of your model. Depending on what kind of TMT company it is, you can sensitize payback months (telecom), payback months improvement, churn, churn improvement, growth rates required to hit certain MOICs, growth in different divisions of the company relative to one another, entry price or multiple, % stake acquired, preferred equity coupon, leverage, carry given to mgmt., etc. etc. - the last couple aren't common, but just to give you an idea of the art of the possible.
That's pretty good, appreciated it. Since I will need to do the same with other sectors (Renewables, Utilities, Consumer Staples, Transport) what approach you use to identify the key metrics?
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