What are beta comps and how do you unlever and relever beta?

Published On - December 31, 2021

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

Beta comps can be used to find beta for a private company or a new
company with not enough public trading history.

The four steps to do this are:

  1. Create a list of comparable companies which are similar in industry and size
  2. Unlever the betas to remove the impact of debt using Unlevered Beta = [1+(1 – tax rate) x Debt / Equity] / Levered Beta
  3. Find the median unlevered beta
  4. Re-lever the median unlevered beta using the target company’s capital structure: Levered Beta = Unlevered Beta x [1+ 1-tax rate) x Debt / Equity]