Guys,
For M&A deal:
DCF
Trading Comps
Transaction Comps
LBO
Are these valuation methods are always used? Do you have to use them or does it depend on the industry?
If the valution is doen correctly or fairly, should they all have almost same valuation? I know clients (sell side) would liek thave a higer value.. is there an approach out of these methods which has a chance to the value higher than the rest?
For a retial industry. What would be the driving factors? What reports analysts or associates look at before deciding the assumptions? Can any bankers share with real life examples that the things and reports are observed ? Who decides in the deal team that the the value is fair? MD?
Interaction with Clients:
While working on a deal. what kinds of thins and documents are needed from clients(if any) for due dilligence purposes?
Is deal team invovled with the managment for working out projections? Does the deal team uses its own assumption with out the use of client?
I know there are allot of questions? But any input will be appreciated..
Valuation is a mixture of art and science that requires a lot of assumptions and variability. The client generally dictates the final valuation in the sense that if the client is not satisfied they will often leave and fine a new bank. Bankers are willing to accommodate their clients wishes to the extent that it does not jeopardize the bank's credibility and does not provide a significant hindrance to getting the deal done.
Valuation is done based on ranges as it is impossible to peg the value of a complex enterprise. DCF measures the intrinsic value of a company based on its future cash flows. DCF valuation is almost always lower than transaction/LBO comps due to the control premium that is included in trans/LBO comps.
I would recommend that you buy a basic package like TTS (Training the Street) or ScoopBooks I-banking Guide, both of which offer a pretty comprehensive overview of valuation.
I would also recommend that you familiarize yourself with spell check as banking is all about detail. Good luck.
Can anyone comment on the Scoopbooks I-banking guide? I just went through SA recruiting, and never had much of a problem with technical interviews at BBs. Granted, they don't go too in depth, and I was hoping to get some good prep in before my SA starts.
Hey waltersobchek, I bought scoopbook's "For the Practitioner" book and really liked it. It covered a lot of material in depth and taught me some new interesting topics. I'm going to be a SA at a BB this summer, so I thought it was pretty helpful to help get me prepared for work. It's pretty long and dense sometimes however.
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