Seller's Valuation Analysis and Buyer Analysis
Chapters in this video
- 0:00 Why valuation must come before buyer outreach
- 1:25 Comparable company analysis versus precedent transaction analysis
- 2:59 LBO analysis sets a floor, not a ceiling
- 4:19 Football-field chart and board price setting
- 5:02 Capacity to pay beyond cash on hand
- 6:01 Strategic acquirers versus financial sponsors in auction design
- 6:34 Acquirer stock drop as deal-danger signal
- 7:17 Auction formats: broad, targeted, negotiated
- 8:19 Rapid-fire exam recap
What this video covers
- Why comparable company analysis gives a market view while precedent transaction analysis can reflect a control premium, yet precedent multiples are not guaranteed to exceed trading multiples
- How leveraged buyout (LBO) analysis sets a floor, not a ceiling, because financial sponsors typically target 20% internal rate of return (IRR) and cannot bid above their math
- What a football-field chart displays and how the convergence or divergence of valuation methods helps a seller's board set its reservation price and aspirational target
- Why capacity to pay includes cash, leverage capacity, and equity-issuance capability, not just balance-sheet cash
- How a 10% or greater drop in the acquirer's stock price on deal announcement signals analyst skepticism and threatens deal completion
- Why the valuation report must precede buyer analysis, and how buyer universe size and quality dictates whether the bank recommends a broad auction, targeted auction, or negotiated sale
- When bankers filter out buyers based on antitrust risk or Committee on Foreign Investment in the United States (CFIUS) concerns before inviting them into the process
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