I am working on a start up with some friends and am trying to model out a scenario for our cap table. Let's say we are taking in investment for the first time ever and that we are raising at a $10M valuation and are offering 20% equity for $2M in capital. Let's assume our valuation doubles in 12 months to $20M and we want to raise an additional $2M of capital but didn't want to dilute the early investors. Can we simply offer the second round investor capital from our 80% stake and retain the early investor's equity position without dilution? Does this ever happen in practice?
11 Oct 2021
Became interested in M&A Arbitrage recently and am hoping to get a deeper look at how it all works. Know the bare minimum basics, but need some recommendations on readings/resources to learn more. Also am more specifically interested in learning how the valuation process works in the M&A Arbitrage strategy + the research process surrounding the job. If anyone knows where I can find some resources on how to build M&A Abirtrage specific valuation models (if there even is such a thing) would be much appreciated. Don't have a quant background at all but from my readings, I've seen that M&A
06 Oct 2021
Hi all-I'm a recent finance grad with hopes to land in PE someday. I know the road to PE almost always involves doing time in valuation and/or IB, (or corp dev) and I'm having issues getting onto that first step. A little background about myself: I have had two full-time internships in accounting & back-office finance but was never able to land a prestigious 10-week analyst role. Out of over 100 applications, most of them being valuation or IB, I've had ~10 interviews, 6 of which I've gotten to the final round (rejected by all), and I just received an offer to join a BB in middle-office trade
29 Sep 2021
Hey, I am a German student from a no name Uni with a good Bachelors degree. I got experience in Assurance at the Big 4, worked 6 month in the Corporate Finance department of a small bank and another 3 month in Transaction Advisory at a Big 4 Firm. I really want to get into IB in London but I feel like its a bit difficult, especially because there are not that many Off-cycle internship opportunities. Any advice on next steps? Master degrees at top unis are currently to expensive for me.
13 Sep 2021
Here's my question to all the tech gurus out there. Subscription-based software business has some revenues (let's say 1m), decent but not phenomenal ARR growth and has spent to-date 5-6m in R&D. They tell us that valuing them off revenue is not gonna fly, as revenue doesn't quite reflect yet all the investment in R&D (that will, in theory, generate more revenue at a higher growth rate in the future). If you can't simply apply a multiple to revenue based on ARR and ARR growth, how would you go about valuing this business then - is there a premium you would add to reflect the "future value" of
12 Feb 2021
Can someone help me please? I would really appreciate your feedback on my qualification test. What can be improved? Assignment below: Please prepare the following materials on the assigned publicly listed company: · One slide in Power Point format with an overview of the company o Please presume the evaluator is not familiar with the company and should get a basic understanding of the business. While there is no set format for the slide, it must include several bullet points with business overview · Excel spreadsheet with the key historical financial numbers and a brief DCF based on your own
02 Jun 2021
Hi everyone, Wondering what you feel are the best methods to value a company that is loss-making for the next 4y (still trying to figure out margin run-rate after that) in the Saas space? Thinking of going TAM -> % penetration -> steady state margins -> cash conversion Don't have much info (nor enough time) to do a proper DCF Should I look at LTV/CAC as well? What other metrics/methods do you recommend? Also, although this company sells subscriptions for software, it effectively has to install hardware from a third party to do so. (Think about selling editing services to a client but having to
13 Oct 2021
I've got two offers to choose from. I eventually want to make the transition to IB. 1) TAS with non-big 4 accounting firm (think RSM, GT, BDO). Opportunity to work on live deals doing diligence, gain accounting experience, additional opportunities to work on strategy and valuation projects. I like this team more. Travel semi-regularly. 2) Valuation with big 4 accounting firm. Most of the work centered around PPAs with some due diligence M&A work. Team works primarily on valuing intangible assets. Travel is not common. Which position would be the best for making the switch into IB? Thanks for
14 Oct 2020
Can anyone point me in the direction of a primer or resources on building unit economics models for tech companies? Everything I've found so far is pretty theoretical and hasn't been too useful in practice. I'm trying to get a better understanding on how to value public tech/SAAS companies with negative or barely positive operating margins, EBITDA, FCF, etc. I know revenue growth (and TAM) is a huge part of the story but I'm looking for something that will incorporate ARR/CAC/churn/etc and build out a valuation from there. I've done most previous valuation work using traditional financial
11 Feb 2021
Hi there, A bit ashamed to say that I am still a bit confused how growth stocks actually produce their returns for their shareholders over time. More specifically the actual mechanics of it. Please bear with me: Let's say you buy one stock of a tech company today at t=0 at a rather high 1yr forward P/E ratio. Now fast forward one year to t+1. Suppose the earnings announced at t+1 are exactly those implied by 1yr forward P/E ratio a year ago at t=0. At t+1 we realized one year of earnings. The remaining future earnings are unchanged minus what we just realized at t+1. Basic algebra tells me
19 Feb 2021
Hi everyone, I have two potential opportunities in valuation. Eventually, I'd like to end up in IB then PE/HF. However, I did not attend a target school and will have more of an uphill battle. Job 1: "Business Valuation Analyst" at a large regional CPA firm. They have a solid brand name around my region of the US. I would be working on M&A transactions as well as litigations. I'd be doing purchase price allocations, DCF, market analysis, etc. Job 2: I haven't yet received an offer, but have a 2nd round of interviews with Duff and Phelps tomorrow for a "Portfolio Valuation Analyst" position. I
11 Nov 2020
I was recently offered a position to join the valuations desk of a MF PE Shop. I am from a nontarget and my ultimate goal is to eventually go to a M7 program for my MBA. Would taking this BO job hinder my ability to make that transition? Also, does anyone have any numbers into how compensation is paid out in non-junior level roles? (How much associates, and Directors make). Debating if I should take this role for the prestige or go work in a CF role for a Fortune 10 Company. Any help is appreciated. Thanks.
12 Feb 2019
I've been reading these forums for a while and finally decided to make the push into IB. Currently looking to lateral internally (or externally if it doesn't work out) from a PWM rotational program into Investment Banking. I've been doing my homework and following the guides posted on here and M&I. Through my networking efforts, I secured a phone interview in ~ 10 days to "ask a few questions about your background". I assume this will be a behavioral style interview with the typical "Walk me through your resume" and "Why IB?/Why this group?" questions. Am I under the right assumptions or will
28 May 2021
Hello all, I know that we use NAV model to value E&P companies. So in NAV we use Revenue-production cost-capex-taxes as cash flows Why don't we subtract interest expense here, as NAV is only for equity holders. Thanks.
14 Jun 2021
TL;DR - tried tweaking DCF to make it more optimistic but cannot honestly justify tweaks. Resorting to arriving at target share price with DCF/Comps weight - don't know how to justify/explain my decision for 60% DCF 40% Comps. Need some guidance. Disclaimer: I'm creating an equity research/stock pitch report and I'm also heavily debating between sticking with a contrarian view or "staying in line" with the street. If I use my DCF, I'll be contrarion. With the split, I'll be "in line". Would it be wise just to "stay in line" when I'm presenting this report to potential recruiters/employers? I
31 Oct 2018
I want some clarity regarding the treatment of Interest expense in the Cash Flow statement. I'm not able to get a satisfactory understanding on the same. Let me just break down my doubt into two parts- 1. Why is interest expense added back to PBT in Cash flow from operations? My Understanding- Since we have adjusted interest expense which is a non-operating expense in P&L, therefore we need to add back to PAT in the cash flow from operations to get the real operating cash flow. Simultaneously, deduct interest expense from Cash flow from financing. 2. Can Interest expense be operating in some
04 Jul 2020
Hey guys- any recommendations on the best desks for building a good skillset in valuation, modelling, credit analysis (or really, any of the skills that IBD/ER folks use)? I'll be interning at a BB in S&T but would love to cast my scope as wide as possible. Obviously I'm still really interested in S&T, but thought it could be nice to get some exposure on the fundamental side as well and learn the skillset of IBD/ER folks. Any ideas of specific desks to shadow or reach out to?
21 Sep 2020
I have made a forecast for H&M, from 2021 -2035. I was wondering should I forecast based on the year 2020 or 2019 for 2021. 2020 was such a special year because of corona or should I use 2020 as normal??? I know I also have to take into account IFRS 16 and further on. I would need help from someone experienced on this topic.
26 Oct 2021
Hi, I am finding it difficult to understand how DCF gives us the equity value in the range of the current share price? Example: Stock is trading at $110s. How does discounting future earnings, give us a value in the range of say $90-120? I am not able to understand it mathematically why the stock price is PV of future cash flows? Let's say you start a business with only equity, then balance sheet below: Assets: 10k Equity: 10k If there are 100 shares, then 100 dollars is share price. How does DCF give us value around this range? I am unable to comprehend, please help!
11 May 2019
Hi all I know that there is a lot of threads on some of the same aspects of my questions, but however I probably have another background. I am a bit trapped and have been working in various positions since I finished my master degree around four years ago and hope you can help me with some advice. About me: Living in Europe, late 20s, non-target business school and average grades. I work in a Big4 valuation-team and recently moved from RE after being promoted. Started my career in a "start-up"/relative young company where I mainly build excel models to track investments etc. (No valuation etc
08 Mar 2020
I am a sophomore at a semi-target school and I am applying to a student run investment group. I have had my toes dipped into the finance world for about a year or two now, but when it comes to understanding the process of valuing a stock in order to use it as the stock to pitch, I am clueless. I have spent considerable time studying real estate finance and building out RE models but that is not going to help me here. Does anyone have some basic guidance to help me understand how to pick a stock that won't get me laughed out the interview?
02 Sep 2020
I need a small favor. I have a very basic question about discounted cash flow modeling. I think I know the answer, and it is probably obvious, but I have been thinking about it so much that I have confused myself. This issue is very important to a financial model I have created for the acquisition of a property so I want to make sure I get it right. If you have 10 minutes to spare, please look at the attached spreadsheet and fill in the spaces highlighted in yellow. This is essentially a VERY simplified version of the issue I am having in my real model regarding time 0 cash flows and the
29 May 2019
Hi all! I am beyond lucky to have many offers, however, they are all over the place and I don't know what is the best option to pick for my future. I am a finance student - unsure what I want to do! Goldman Sachs PWM - Great name and pretty much double the pay I would be getting at the other opportunities I am listing. Downside, not as meaningful work. JPM - Two opportunities here. One in TCIO and one that is more Accounting. Not as interested in these roles, but great name! Private Equity Firm - A mid size firm, LOVE the people and has a great environment. Not amazing pay though... Is PE
23 Dec 2020
Hey monkeys, I'm approaching my dissertation - an 80-page paper that concludes my Master of Finance programme. I work in IB and my interests/curriculum lies within the domain of corporate finance, valuation, modelling, investing, etc. I'm struggling to come up with a relevant and proprietary topic to address and would really appreciate it if anyone here had some juicy ideas or input to the longlist of areas below: - The market implications of retail investing (context: Surge of new retail investors during covid) - Value investing - ESG valuation - Something related to rising inflation? -
10 Nov 2021
Hi all, I have some questions on an undying topic that's continuously discussed on the street: how tax rate affects EV valuation of companies. Some people argue it's positively correlated to EV while others argue it's the opposite. Based on my experience/observation, I think it's positively correlated especially when using unlevered DCF and simple EV formula. In the former case, increase in tax rate decreases WACC (EV goes up). And also in the latter case, cash and cash equivs go up as tax rate goes down (EV goes down). I heard some people saying it depends on valuation methodologies, so I
08 Sep 2016
Hi guys, I am currently interviewing for a role and have been tasked to build a valuation model for a gas downstream and pipeline player (i.e. they supply products and the associated infrastructure). I'm struggling on a couple of notes: 1) Typical forecast horizon - should I be forecasting out for 5 or 10 years? 2) Would there be an exit multiple? Or is it safe to assume the end of life of the asset at some point 3) Would the typical O&G 10% discount rate be sufficient? 4) If the investor were interesting in acquiring a 10% stake for example, would that be just be 10% * enterprise value from
08 Nov 2021
Team, I recently purchased Rosenbaum and Pearl V2. The book is a GODSEND! (Particularly the new buyside chapter) Can anyone advise me on how I get hold of the Excel models to accompany the book? Thanks in advance!
26 Jan 2019
Hi All. Am needing guidance on how to answer the question below. Anything you can share would be greatly appreciated! If we were looking at an investment in X sector, where would you start your research and analysis? My thinking is that you would Start with researching the market (ensure it is large and growing), low barriers to entry, fragmented competition, etc. Look at target company to ensure that fit the Company's investment criteria (strong leadership, unique competitive advantage in the sector, history of strong performance via historic CF (absent of volatility), relationship with
09 Jun 2021
I am looking for Healthcare specific accounting questions or interview questions to consider for a healthcare IB role. Basically, other than the general valuation methodologies and other general IB questions. What should I be prepared for a technical interview? For example, for software companies is important to adjust EBITDA for coding expenses that are capitalized rather than expensed. Something similar for Healthcare? Most popular multiples that are used? Unusual valuation details that I should be aware of? Accounting details that I need to be aware of? Thanks
28 Aug 2020
Snapchat (recently renamed Snap Inc.) has filed for an IPO reportedly set for Q1 2017. Snap is seeking a valuation of $25 Bn according to reports at Bloomberg . The question arises if such a rich valuation of 25X Forward Revenue makes sense at all. "At $25 Bn, Snapchat would have roughly the same value as Linkedin and HP." What is Snapchat and how exactly is making money ? Snapchat primarily sells video ads. It also sells branded "filters" and most recently, a Discovery feature for mass marketers. Snapchat selling point is its demographics where users ages 18 to 24 account for 70% of the
17 Feb 2017
I just got a full-time offer to join the VME group at EY. Super stoked because the pay is ridiculously high considering I come from a no-name school and I'm just wrapping up my undergrad. I had a few questions about the job, mostly curious how much travel you get to do, what type of software you get access to (very superficial and ego-driven interest in getting access to a Bloomberg terminal which I know the Complex Securities Valuation group gets access to in VME, just not sure if Business Valuation gets it), how similar to audit is the role (I read some posts from pre-2010 that mentioned VME
04 Nov 2021
Hi all, I worked in a local investment banking boutique for some years and have just resigned to start my own M&A advisory firm. I used to work with Capital IQ, but have just noticed how expensive this is. I wonder whether you guys can suggest me a cheaper alternative to Capital IQ? I just need a platform for business valuation, so basically need to be able to screen trading comps (to extract multiples, betas and capital structures) and transaction comps. I just found TagniFi but I'm still not aware about the price. Thanks!
02 Dec 2020
I feel like there is a huge misconception about the timeline of M&A transactions and the functions carried out by affiliated parties during the process. Private Equity M&A Process Timeline Therefore, I would like to assume the following scenario in order to illustrate the entire process: A private equity funds ("the seller") seeks to exit an investment in one of its portfolio companies. Hiring an Investment Bank & Contacting Potential Buyers First, an investment bank is hired to screen potential buyers. After identifying potential buyers, the investment bank will distribute a short teaser
31 Oct 2012
Hi All, I am currently trying to complete a DCF, but am stuck on what I should select in terms of Capital Assets vs Capital Liabilities. Below is a screenshot of the balance sheet, I know typically Assets include: AR, Inventory, other receivables, and Other current assets. While Liabilities includes: AP, other current liabilities, and deferred revenue. But would Prepaid income taxes and prepaid expenses be included in Assets? Then for Liabiliteis what about Salaries, self insurance reserves, current operating lease payable, current portion of long term notes payable, and amount due to
11 Feb 2021
Hi guys, I came across an article on "the footnote analyst" about EV/EBITDA and it is throwing me into a loop. When looking at NTM (or future periods) do you forecast both numerator and denominator? I thought you would only forecast the numerator when looking at future periods.
13 Nov 2021
Not sure if this is the right forum for this, but I've been digging and digging for the past few days doing some research to figure out how to value this thing, and I've just been coming out blank. So I thought I'd open it up and see if anyone had any recommendations. If anyone knows of a better forum to ask this question, please let me know. We're trying to value our clients' partnership interest in a joint venture which is subject to a few conditions. For the first 5 years, our client has the option to put their interest back to the other LP for their contributed capital. Between 5 and 10
22 Oct 2021
If I'm reading resumes to interview and I see Training the Street or something similar listed, I will strongly discount the candidate. Why? It shows a lack of priority and judgement - why pay hundreds of dollars for something you'll learn as soon as you start? If you need help for interviews, you can read the Vault/M&I/WSO guide for $30 and be set without the huge cost. It also brands you as a less interesting person - it implies that while others are playing sports or working to pay for college or having fun, you're shelling out hundreds of bucks to learn to do a DCF. That's just my two cents, what are your thoughts on taking those courses to put on a resume?
23 Feb 2011
Currently working on valuing a very indebted retail company for potential takeover and having serious troubles. Operating Income is negative, EPS is negative, Net Income is negative, EBITDA is negative and jumping all over the place, Retained Earnings is negative (and growing), Cash & CE is negative, Revenue is shrinking. Done some public comps so far (this has gone reasonably well, quite a few similar companies), tried to put together a DCF but it just throws back implied share prices of 0 for every sensitivity value. So yea, how do you value a company where almost everything is negative other than just public comps or saying "its worthless". Any help would be GREATLY appreciated! Thanks
15 Dec 2011
So I just came across this free iPad app called uValue. Its created by a couple of professors at Stern and Dartmouth Business School and is essentially a skinned spreadsheet which values companies. It can do WACC (detailed and simple), APV (detailed and simple), dividend growth and even value options. All junior bankers are now irrelevant.
14 Aug 2012
Hi guys, One question I have encountered in the past is to analyze the value creation of an LBO. My first thought on this was to deconstruct the IRR or MOIC to see how each individual value driver (I would say the main ones are a) multiple expansion, b) operational improvements like margin growth or sales growth, and c) leverage). I was looking at a case where all these factors were present, and built toggles for each one so I could see how much each of them contributed to my total IRR/MOIC. However, I could not get the sum of each scenario to equal my base case IRR (where all toggles were
10 Oct 2015
Finished a MSF in 2019 and have been working in valuation for a large accounting firm (~75 mil rev) for the last year. However, I have a close connection at a well respected, mid-sized bank, that is trying to recruit me and put me on a path to be a commercial lender. I enjoy the work I am doing, and see a lot of room for growth. I'm not sure where I want to be in 10 years, but I don't care to try and transition into IB. From what it seems, there isn't much change in salary either way I go. The bank is growing fast within the state, went public 2 years ago. However, our valuation team is also
18 Nov 2020
Week after week, investors have seen multi-billion deals for online businesses with suspect business models. In January, Goldman invested in Facebook at a $50 billion valuation. Zynga's reported $7-$10 billion valuation surpassed that of software giant EA Games. With its recent I.P.O. announced, Groupon even values itself at $15 billion. Some question the reason behind such high valuations...the answer is immense revenue growth. The true question is whether this revenue growth is sustainable: "Why are Venture Investors placing colossal valuations on consumer Internet companies like Facebook, Groupon and Zynga? Their revenue growth is simply off the charts.
01 Mar 2011
Greetings fellow monkeys: I am making a research report on a stock (not school related), in which I need to come up with a valuation for a company (specifically stock price). I am obviously going to do the legwork myself, but I am looking for ideas about how I should go about doing this. Without building out an entire model, how should I go about doing this. Using a multiple of EBITDA standard for the industry based on the most recent EBITDA figures? Some wizardry involving industry (trailing) P/E ratios? CAPM? Can anyone illuminate me? The most general information about this would help to point me in the right direction, so fire away. Thanks for your help.
03 May 2011
Alright so currently I am thinking about either majoring in finance or accounting, possibly a double major if I can do so. My goal right now is to try and get into Big Four TS/TAS valuations or similar. Would just an accounting major be enough to have a shot at this or would it limit me to tax/audit there? Should I try to double major or minor in finance or economics? I've heard minors aren't so worthwhile but would like to get some more input on that topic as well. On another note, if I do get placed directly into FT TS or the like then I am wondering, do most people still go for their CPA at
13 Jul 2012
While I'm not expecting Uber to be valued at $100mm next week, there does seem to be a trend emerging in the convergence of price and value at these so-called "unicorn" start-ups, which is not a particularly good thing for the founders and early investors (among others). As CNBC reports: [quote]High-profile consumer start-ups are feeling the pinch. Evernote and One Kings Lane are cutting staff, Rdio was acquired out of bankruptcy, Gilt Groupe is nearing a sale for a fraction of its peak valuation (according to The Wall Street Journal) and Dropbox shut down two products. In the absence of IPOs
25 Jan 2016
Okay, it took me a long-ass time, but I finally noticed the new "Most Active Monkeys" section in the sidebar and wanted to recommend another section: "Net SBs per Comment" (NSBpC or NSB/C) I know that's a mouthful, but I think it would be a pretty accurate way to indicate which users are the most helpful and/or hilarious. We calculate it as follows: (Total Silver Bananas - Total Monkey Shit) / Total Banana Points Other than the fact that we would have to set some sort of banana threshold of 300 or 500 points so that some user doesn't get two SBs on his first post and skyrocket to the top of
01 Feb 2011
I'm posting this here to get some take on this full-time position with E&Y. I'm very interested in investment banking at some time in my career and I have an interview for this position. Here are two questions I have regarding it: Would investment bankers see this as valuable experience? Anyone how has experience interviewing with E&Y or a position similar to this, do you have any suggestions for the interview? What should I expect? Ernst & Young Interview Process Ernst & Young have a multi-phase hiring process like many other major finaincial firms. You will need to submit an online
23 Sep 2011
Hey everyone, I was recently interviewed for an internship with a local Investment Bank. More specifically, it was for their Mezzanine Capital Unit/ private equity arm. After the interview, everything was going fine and I had a good feeling. However, they asked me to do a quick analysis on a private company in an Asian country that doesn't have any financials public, within 5 slides. The company currently is involved with multiple tech businesses and I approached the problem by looking at the industry peers of each business (a major private MNC and established local asian companies), I
14 Jun 2017