A comprehensive understanding of equity as a means of corporate funding,
offering insights into both the private equity and public equity landscapes,
venture capital, and the strategic considerations involved in raising and
managing equity investments.
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What is Inside the manual?
Discounted Cash Flow Techniques
This section provides a comprehensive guide to understanding and applying
discounted cash flow (DCF) valuation, including the basics of discounting, the
structure of DCF valuations, estimating free cash flow, and calculating terminal
value. It covers key value drivers like sales growth rates and EBITDA margins,
and compares free cash flow to the firm (FCFF) and free cash flow to equity
(FCFE).
Cost of Capital
An essential element in financial modelling and valuation, this part delves into
risk types, the Capital Asset Pricing Model (CAPM), calculating the cost of
debt, and determining the weighted average cost of capital (WACC). It explores
firm-specific vs. market risk, beta calculations, equity risk premiums, and the
optimal leverage ratio.
Comparable Company Analysis (Comps)
Focusing on how to conduct comps analysis, this section discusses selecting a
comparable universe, moving from equity value to enterprise value, choosing the
appropriate multiples, and adjusting for special situations like currency
impacts and exceptional items. It provides practical insights into valuing
companies using comps.
Precedent Transactions Analysis
Offering an overview of using precedent transactions for valuation, including
sourcing relevant transaction information, understanding the mechanics of
analysis, and considerations for equity value vs. enterprise value. This section
is vital for assessing past transactions to inform current valuations.
Valuation Integrations and Considerations
Combining elements of DCF, cost of capital, comps, and precedent transactions,
this part synthesises the methods into a cohesive valuation approach. It
addresses practical aspects like calculating unfunded pension liabilities,
adjusting for leases, and understanding the impact of capital structure on
valuations.
Valuation
A concise guide covers key financial valuation techniques, including discounted
cash flow (DCF) analysis, cost of capital estimation, comparable company
analysis, and precedent transaction analysis. It addresses how to estimate
future cash flows, calculate a company's cost of capital using CAPM and WACC,
apply valuation multiples, and assess the strategic considerations behind M&A
premiums.