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Comparables
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This technique assesses a target in comparison to a similar asset. It is a special case of comparative valuation.
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It is difficult to find comparable cases.
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Historical analysis
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This technique evaluates a deal based on similar deals and valuation in the past transactions.
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Diverse business environments and deal-specific information can make comparisons impractical. Past comparison deals may be underpaid or overpaid.
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Present values
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This technique estimates the present value of future cash flows.
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Results are sensitive to terminal values and discount rates.
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Sum of the parts analysis
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This technique evaluates a firm by division, combining diverse valuation techniques.
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It can be difficult to compare firms with different basis for diversification.
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Leveraged buyout analysis
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This technique assumes high leverage in a deal and requires 25~35% of internal rate of return over 3~5 years.
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This method is sensitive to the timing of acquisition and resale.
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