Merger Analysis Examples Video
Business Growth Strategy - Mergers Merger Analysis ExamplesComparable companies analysis involves the comparison of operating metrics and valuation multiples for public companies in a peer group the comparable "universe" to those of a target company. Peers may be grouped based on any number of criteria, such as industry focus, company size, or growth characteristics, for example.
Download Comparable Companies Analysis Template. Consider an IPO of a private company that does not have a public market valuation. To determine how public markets might value the company, an investment banker will Mergfr the comparables universe, which Merger Analysis Examples consist or one or more peer groups. He or she will use the operating metrics and valuation multiples of the public comparables to determine an appropriate valuation multiple for the private company. Suppose you are an investment banker positioning a technology-focused third-party logistics company your client for an IPO. The company has no direct comparables, but can be legitimately positioned as either a pure-play logistics firm or a business process outsourcing BPO company.
Comparable pure-play logistics companies currently trade at 8. Comparable BPO firms currently trade at 9. To select the comparables universe, you must understand the target Merger Analysis Examples business.
Comparable companies will usually share the similar industry, business, and financial characteristics with the target. The following sources can be used to help identify suitable comparable companies:. You will be able to make the most meaningful comparisons among valuation multiples of companies in the comparables universe when peers have similar prospects for growth Merger Analysis Examples return on invested capital ROIC. Once you have identified the comparables universe, the next step is to collect the necessary information on each comparable company to perform the analysis.
You will need the following information for each company, as a minimum:. Next, plug the information you have collected into your comparable companies analysis spreadsheet. Making pro forma adjustments Exapmles comparable companies' balance sheet items is often the trickiest part of comparable companies analysis. For example, if one of the companies you are analyzing announced a acquisition since its last earnings release, and the company intends to pay for the acquisition with cash, stock, and the assumption of debt, you must adjust the numbers in your spreadsheet accordingly. Specifically, Amalysis Merger Analysis Examples increase the debt balance and basic shares outstanding, and lower the cash balance.
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Material events for which you should make pro forma adjustments include, but are not limited to:. Projected income statement items such as revenue, EBITDA, and net income usually exclude non-recurring items and are pro forma for corporate events click planned divestitures, so you won't likely have to adjust these figures. To compare comparable companies effectively, you must understand why their multiples are different. It is Merger Analysis Examples useful to compare one company's multiples to those of the peer group, collectively.
To do so, calculate the high, low, mean, and median summary statistics for the group as shown in Example 5. The median is generally the most meaningful metric, because it naturally screens outliers.
The Competitive Landscape Of The Industry
Based on the following comparable company analysis, why might company Charlie trade at a premium to its peers? Charlie likely trades at a premium 9. Other multiples may be expressed to one decimal Merger Analysis Examples in the format 0. Valuation Methods Precedent Transactions Analysis. Exhibit A — Practical Application Suppose you are an investment banker positioning a technology-focused third-party logistics company your client for an IPO. Example 5. Build models 5x faster with Macabacus for Excel.]
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