“I Will Return!!” (not GEN MacArthur) A Charter Class member returns to speak on PE Valuation. Bruce B. Bingham, FASA, FRICS 23 September 2013. Getting Started – Definitions. Value – A useless word by itself.
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Bruce B. Bingham, FASA, FRICS
23 September 2013
What definition of value?
What is being valued?
Premise of Value?
Valuation Date v. Report Date
Type of Report?
- Useful for asset intensive businesses - No consideration of "going-concern" or profit
- Preferred by lenders - Intangibles defensible, but difficult
- Facilitates purchase price allocation - Cumbersome valuation process
- Excluding intangibles, can represent - Lack of information "liquidation" value
- Value based on actual prices paid - Does not take into account synergies for comparable companies
- Use of hard numbers - Focuses on historical results
- Multiple multiples - Multiple multiples can lead to a divergence of indicated values
- Requires estimation and application of premiums and discounts
Guideline Company or Representative Transactions
Multiples Relevant to Industry Being Valued.
TIC or Equity Multiples?
Comparable Company Medians or Averages?
Haircuts to multiples.
Adjustment from Minority, Freely Traded Basis.
For Transaction Comps, Lookbacks before 15 September 2008
Forward Multiples? An IB tact that mixes approaches
Risk in Market Approach v. Risk in Income Approach
BBB’s Cherry-Picking Postulate: If information exists with which to apply an approach to value, then you better use it (or explain why not).
Use experience and professional judgment in reconciling your indications of value from the various approaches.
No formulas or averages. Explain basis for weighting.