What's the WACC for equity on a private company without good public comps
What should I use as the WACC for equity on a $150MM Tech Co.? There's no good public comps, is there a general number that I can use as WACC?
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RichChigga, sorry about the lack of response. Maybe one of these topics will help:
More suggestions...
Hope that helps.
Depends on Capital structure, but due to assumed illiquidity, I’d say something in the 13-17% range. Sensitize it and see
Can I just assume 20%, since that's typically the ROI that PE company like to see on their equity investment?
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Yeah, in the meaning that LPs demand 20-25%, WACC in an LBO/ PE is higher than “normal.” But you can’t just assume 20% since debt should drag it down.
Many firms have a group-wide rate for WACC (firm-wide, or specifically for industries/ company stage) it’s not that serious. Try to pull peers or use a sensitization between 13-20% for a desired output.
Remember that LPs/ Equity in Wacc are important to a degree, but The IRR to break-even is essentially the cost of debt; thus it is imperative to incorporate debt in WACC.
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