Forum Search: capital markets
RE: Why does an LBO set the floor valuation?
LBOs set the floor valuation because in theory, anybody could buy another firm (in an M&A transaction) and make it highly levered but in such a deal, there would be 'synergies' and as such, if you do anything 'value added' on top of an LBO, one should extract additional value above and beyond a ... Read More
LBOs set the floor valuation because in theory, anybody could buy another firm (in an M&A transaction) and make it highly levered but in such a deal, there would be 'synergies' and as such, if you do anything 'value added' on top of an LBO, one should extract additional value above and beyond a ... Read More
RE: Capital leases revisited x2
Industry is important - they should not only be adding back minority interest but also subtracting out equity investments (opposite of minority interest). Rationale: match the numerator (valuation) with denominator (EBITDA). So that means, profitability on IS is increased by 100% of subsidiary, but ... Read More
Industry is important - they should not only be adding back minority interest but also subtracting out equity investments (opposite of minority interest). Rationale: match the numerator (valuation) with denominator (EBITDA). So that means, profitability on IS is increased by 100% of subsidiary, but ... Read More
RE: How do I treat Deferred Maintenance Revenues in TEV?
This is definitelty akin to deferred revenue and unearned revenue (ie magazine subscriptions). Thus, not to be part of TEV and so the same answer - don't add or subtract. In the case of a merger, we would normally treat this as a closing adjustment due to working capital - that is, the buyer req... Read More
This is definitelty akin to deferred revenue and unearned revenue (ie magazine subscriptions). Thus, not to be part of TEV and so the same answer - don't add or subtract. In the case of a merger, we would normally treat this as a closing adjustment due to working capital - that is, the buyer req... Read More
Incorporating maintenance capex into free cash flow calc
Full Question: I took your "Corporate Valuation Methodologies" class and was impressed with the quality of the class and hope to take more in the future. I am struggling to find a valuation procedure that I'm comfortable with. The denominator should be EV. The appropriate numerator, in my view, ... Read More
Full Question: I took your "Corporate Valuation Methodologies" class and was impressed with the quality of the class and hope to take more in the future. I am struggling to find a valuation procedure that I'm comfortable with. The denominator should be EV. The appropriate numerator, in my view, ... Read More
WACC: market vs book value & what regulated industries?
Full Question: 1) Would you suggest for calculating the WACC (to be used as the discount rate) using the market value of the securities rather than book value in order to determine the weightings for the cost of debt and equity securities? (2) same question, but...If an industry was regulated (... Read More
Full Question: 1) Would you suggest for calculating the WACC (to be used as the discount rate) using the market value of the securities rather than book value in order to determine the weightings for the cost of debt and equity securities? (2) same question, but...If an industry was regulated (... Read More
Difference btwn $100 special dividend vs share repurchase
Full Question: As you know, a company can do a share repurchase, or a special dividend, when they're trying to return capital to shareholders on a standalone basis. Why is it that both a special dividend of $100 and a share repurchase of $100 of stock necessarily results in the same exact pro forma... Read More
Full Question: As you know, a company can do a share repurchase, or a special dividend, when they're trying to return capital to shareholders on a standalone basis. Why is it that both a special dividend of $100 and a share repurchase of $100 of stock necessarily results in the same exact pro forma... Read More
Forecasting working capital off future quarters' sales?
Full Question: When forecasting working capital levels on a quarterly basis, can I assume that the best approach, given the seasonality of retail stores, is to base my inventory/payables forecasts on that same quarter’s sales? Alternatively, would it be better to base my current quarter inventory... Read More
Full Question: When forecasting working capital levels on a quarterly basis, can I assume that the best approach, given the seasonality of retail stores, is to base my inventory/payables forecasts on that same quarter’s sales? Alternatively, would it be better to base my current quarter inventory... Read More
LBO Deal Structuring and Capital Lease Treatment Discussions
Full Question:
LBO Deal Structuring and Capital Lease Treatment Discussion Thread
Full Question:
LBO Deal Structuring and Capital Lease Treatment Discussion Thread
Leveraged-adjusted exchange ratios in M&A stock deals
Full Question: I would like to know how to correctly estimate exchange ratios in case of all-stock-transactions based on leverage-adjusted EBITDA, TEV, Equity Value, and Earnings contribution analysis. Think an adjustment needs to be made to account for the difference in capital structure of both c... Read More
Full Question: I would like to know how to correctly estimate exchange ratios in case of all-stock-transactions based on leverage-adjusted EBITDA, TEV, Equity Value, and Earnings contribution analysis. Think an adjustment needs to be made to account for the difference in capital structure of both c... Read More
In a stock sale, the acquiror purchases the stock of the Company, thus purchasing the entire company (all of the assets, liabilities and future contingencies). In an asset sale, the buyer only purchases certain assets and liabilities of the target company. Thus, in an asset sale, the acquiror is not... In a stock sale, the acquiror purchases the stock of the Company, thus purchasing the entire company (all of the assets, liabilities and future contingencies). In an asset sale, the buyer only purchases certain assets and liabilities of the target company. Thus, in an asset sale, the acquiror is not responsible for liabilities incurred in the past but in a stock sale the acquiror is responsible for all liabilities, past and present, since they own the entire company.
In a stock sale, the seller is taxed at the capital gains rate and the buyer does not experience a step-up in tax basis. In an asset sale, the seller is potentially double-taxed for both the appreciation on the assets and capital gains on the distribution of proceeds. Also, the buyer receives a step-up in tax basis and can depreciate/amortize the newly acquired assets. Read More