General Terminology

Question 1

Comps Analysis

Answer 1

Valuation parameters are established for a target by determining its relative positioning among peer companies

Question 2

Precedent Transactions Analysis

Answer 2

Comparable acquisitions are selected then a multiples approach produces a valuation of the target. Recency and similarity are fundamental

Question 3

DCF Analysis

Answer 3

A target’s value is derived from the present value of its projected free cash flow (FCF). Important alternative to comps and precedent, which can be distorted by extrinsic factors such as market aberrations.

Question 4

Intrinsic Value

Answer 4

The valuation implied for a target by a DCF analysis

Question 5

LBO

Answer 5

The acquisition of a target using debt to finance a large portion of the purchase price. The remaining portion is funded with an equity investment by funds managed by a PE firm (“sponsor”).

Question 6

Analysis at Various Prices (AVP)

Answer 6

Aka a valuation matrix, displays the implied multiples paid at a range of transaction values and offer prices (for public targets) at set intervals.