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I'm not an acquisitions guys but I'm going to go out on a limb and say the following:
0 = (purchase price) + CF1/(1+.12)^1 + CF2/(1+.12)^2 + etc.
--> You have the top line so you need to figure your expenses to solve for CFs: know lease type (N, NN, NNN) and then make assumptions for expenses based on industry/local market knowledge. Deduct capex from NOI to get to CFs. --->Insert into equation above and solve for purchase price.
Anyone can correct me if need be.
This is correct. Use Rent Roll, CapEx, and Expense Assumptions to project cash flow for the 5 year holding period. Use =NPV() function in excel to back into "what you would be willing to pay" for the investment.
A newbie question. I was under the impression that the NPV is the summation of cash flows with the deduction of purchase price. It is the profit from a venture, isnt it?If the NPV from a series of cash flows and purchase price with an assumption of a particular discount rate is 15K for example, I thought you can assume that you will be able to make a profit of 15K after paying all debt obligations. Am I wrong? When I read your comment, I thought you meant NPV is what you would be willing to pay.
NPV finds what a series of future cash flows are worth today. It takes into account required rate of return. Think of it this way... What is the maximum amount of cash I'm willing to outlay upfront if I require a 12% return and I believe the project will cash flow at x amount annually? The Net Present Value is the answer to this question.
You make future cash flow growth assumptions and then work your way back. If you payout more than the PV of future cash flows then you wont realize your required rate of return.
can you do this with waterfall splits. Say a sponsor not deal level return, or not a lp investor wants a 12% irr return. same thing? will goal seek work here.
I
backing out purchase price (Originally Posted: 04/19/2010)
Hi all,
I am trying to back-out the purchase price of a public company acquiring a private company. This is all the publically available info I have:
$38.5M equity raise Costs associated with acq. ~$25M Acq. resulting in $150M addition in goodwill and $30M in other intangible assets $500M in net cash paid on CFI (but there are many other small acquisitions)
I ballparked around $250-$400M. However, if I wanted to be more precise, what other info would be useful that can be found on a 10-k?
Thanks a bunch in advance for your comments!
-
If its a public company making a $200-400 million acquisition, its HIGHLY unlikely that the purchase price is undisclosed. Actually, its virtually impossible.
You're probably not looking hard enough.
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