Valuation – an answer
There is room for lots of debate on valuation here – so no “right” answer!
- If we worked on say a valuation of 6.5 x EBITDA, 6.5 x 2.0 EBITDA = 13.0
- Enterprise value = 6.5 x 2 = 13.0
- Price paid for shares = enterprise value minus debt plus surplus cash
- Price paid for shares = 13.0 – 0.0 + 2.5
- Price paid for shares = 15.5m (higher than enterprise value, which is unusual)
You can download the spreadsheet showing the LBO modelling structure, and the impact of valuation.
Impact of valuation on LBO modelling structure
Key learning points:
- The difference between enterprise and equity valuation,
- The treatment of surplus cash in a deal structure (& the impact on valuation)
- The application of basic valuation techniques
Return to the valuation modelling section of the LBO course
Click here to return to the section of the LBO course dealing with the impact of valuation modelling. Please click here to continue with the LBO course training.
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