Tech valuation model – get 8 SBs
I’m making a valuation model to help convince boutiques I have modeling skills. Many have advised against, many have been for it, but that’s not what I’m asking about. I’m pretty sure I want to value a software company. I’ll give you TWO SBs for each of these you can shed light on. I’ll go into other threads to make sure you get your full SB reward, so check your count.
- Should the valuation be of a small/midsize company, i.e. is valuing a big player (e.g. Oracle) pointless since they’re too big to be acquired? Any tech company suggestions?
- 3 pages for the 3 statements + 1 page for the DCF…is that enough?
- Do I need to include any comps, or full-blown comps i.e. 3 transaction and 3 comparable companies with options, etc? Could take a while, but if it's worth it...
- What else should I add? Include input pages, or just output pages? A football field page? a cover page? etc?
Thanks for any input you guys can offer.
Hope this helps.
just realized SB/MS capability is off right now (looks like there was a thread about it). But some users here will tell you I am very generous with SBs (have given tons via PM a few times) and will make sure you get plenty.
Building a model for Oracle, MSFT, AAPL, etc. will end up becoming very complicated because you have to model out each of their business lines to really do it right. A few smaller, more straight forward companies to take a look at would be Adobe, Salesforce, LogMeIn, Red Hat...
You may also need some tabs for revenue and costs builds. Including a comps page and associated valuation is probably a good idea.
All of the above.
If you want to do this for practice, then it would definitely be a good learning experience, but it is unlikely that anyone in banking is going to spend time reviewing your work when making a decision to hire you. People are just too busy.
Agreed... I wouldn't audit the thing, but would probably look to see if i) the balance sheet balanced ii) accounts didn't blow up to unrealistic values and iii) growth and value makes sense
First of all, pick a sector that is relevant to that boutique. If they don't do software, I would not bother. They probably won't be too interested. So look up what sectors they work in.
This model/ proposal will be a lot of work. Are you prepared for it?
b) For some other ideas, try looking through: http://www.bloomberg.com/markets/companies/computer-software/
c) Salesforce.com? Akamai?
d) Go for a foreign listed stock if you dare. Be prepared to explain why you pick company X and why that is relevant and of interest to Boutique X
e) Easier if you pick something that is generating strong cash flow, not something in distress or a penny stock.
b) Depreciation, capex, amortization
b) VB, if you know it
c) Proposals for optimized capital structure
d) LBO example of what could be pitched to a PE as an LBO buyout
If you can get access to analyst reports, do so to double check your results. Probably some monkeys here can help you with that.
http://tradingevents.blogspot.com/
darkpool, I'm a novice in LBO modeling and it';l take me a while to really master. Is it ok to leave the LBO out?
What is VB, and how do I propose an optimal capital structure...somehow find the cap structure that maximizes the firm's NPV? or just the firm's equity NPV?
If they do work with PEs, an LBO is a must.
VB = visual basic
There are several methodologies for optimal capital structure, but that is dependent on the individual company. For example, if they have no debt, what is the effect of taking on debt? You can do synthetic ratings like S&P or Moody's to get an idea of what spread they will pay over treasuries, etc. Tax shield from the debt. That's a course in itself.
You can also look at restructuring the company as a scenario. For example what would happen if eBay spins out Paypal. Don't forget these boutiques do pitches to bring in the deals.
Would recommend looking into a financial modeling course. Maybe a self-study?
http://tradingevents.blogspot.com/
Yeah, I have BIWS - gone through advanced valuation, basic M&A, and zero LBO stuff. I'm not approaching many firms who work with leveraged PE...maybe growth equity. I don't want to sound like a pussy, but I'm afraid adding too much presentation/subjective stuff beyond traditional modeling could be too risky? Especially considering I won't use the model very often, i.e. only in an interview and only if I'm specifically asked about my modeling experience.
Just build out a basic operating model like discussed. Doesn't take a ton of modeling experience and you should be able to do it based on the knowledge you would need for a technical interview anyway.
What about a DCF, comps, and a football field? At least a DCF, since that's pretty easy to do off an operating model?
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