In today's highly competitive market, spotting value creation opportunities as well as understanding risk pre acquisition is key to driving value on completion and under ownership. Our Private Equity team works with our specialist sector teams which enables us to provide insights across all business sectors. This in turn helps facilitate the identification of strategic opportunities for buyouts.
When valuing a company as a going concern there are three main valuation methods used by industry practitioners:
Comparable company analysis (also called trading multiples or peer group analysis or equity comps or public market multiples) is a relative valuation method in which you compare the current value of a business to other similar businesses by looking at trading multiples like P/E, EV/EBITDA, or other ratios. Multiples of EBITDA are the most common valuation method.
Precedent transactions analysis is another form of relative valuation where you compare the company in question to other businesses that have recently been sold or acquired in the same industry. These transaction values include the take-over premium included in the price for which they were acquired. These values represent the en bloc value of a business.
Discounted Cash Flow (DCF) analysis is an intrinsic value approach where an analyst forecasts the business' unlevered free cash flow into the future and discount it back to today at the firm's Weighted Average Cost of Captial (WACC). A DCF analysis is performed by building a financial model in Excel and requires an extensive amount of detail and analysis. It is the most detailed of the three approaches, requires the most assumptions and often produces the highest value. However, the effort required for preparing a DCF model will also often result in the most accurate valuation. A DCF model allows the analyst to forecast value based on different scenarios, and even perform a sensitivity analysis.
For larger businesses, the DCF value is commonly a sum-of-the-parts analysis, where different business units are modeled individually and added together.
The methodologies to adopt depends on the circumstances surrounding the valuation and the nature of the company in question.
1) Current Operations:
Adan provides services in a number of areas listed below:
Our experienced team build robust, transparent financial models covering all circumstances and across a wide range of sectors. Our approach is to start with a clear understanding of the situation and design a bespoke model using proven methodologies and techniques. The advantages of our models include creating outputs and usability that are designed specifically for the user, as well as providing the flexibility of assumptions to perform sensitivity analysis.
Our experts partner with clients on corporate planning, providing perspective not only on immediate value and impact, but on long-term implications. We work closely with management and other advisers to leverage and complement their knowledge and ensure maximum impact, and actively support implementation and skill building.
