4 ways to value a company are:
- Comparable companies: looking at similarly sized companies in similar industries and seeing which multiples they trade at, then applying this multiple to the target company
- Precedent transactions: looking at past acquisitions and seeing which multiples they were acquired at, then applying this multiple to the target company
- Discounted cash flow (DCF): forecasting future unlevered free cash flows and discounting them to the present period at the weighted average cost of capital (WACC), as well as forecasting a terminal value and discounting that at WACC as well
- Leveraged buyout (LBO) model: using a 3-statement model, debt schedule, and exit waterfall, we figure out the acquisition value using debt to buy the company at a given IRR (internal rate of return) of usually 20 – 25%