Fromula TEV
Equity Value + Debt+Preferred Shares+Minority interest-Cash
What is TEV
All capital provided by all Stakeholders of the company. The house value doesn’t change based on how it’s funded.
Minority Interest
If we own more than 50%, we consolidate 100% of the companies operating activities on the books. Meaning we consolidate Revenue, COGS, Operating Expenses, EBIT, D&A.
Valuation Numerators and Denominators
If our Denominators includes 100% of the entities revenues our numerator has to include 100% of it as well. TEV/REV, TEV/EBIT,TEV/EBITDA, P/E,P/FCFE.
Equity Multiple
Levered– Its called levered because it depends on how much debt the company has as its a factor of what’s left over to NI. P/E (Price-to-Earnings),Equity Value / Net Income,P/S (Price-to-Sales). They use denominators that include interest expense.
Operating or “Unlevered” Multiples
Unlevered–Its called Unlevered because it excludes interest expense such as EBITDA, EBIT, Revenue,COGS. All denominators will be higher on the income statement, so we don’t double count the debt aspect. TEV/EBITDA, TEV/FCFF, TEV/EBIT.
Equity Multiple and Operating or “Unlevered” Multiples
Equity multiples use denominators that include interest expense. Operating/unlevered multiples use denominators that exclude interest expense.
How to find competitors in the market for Comps
10k, SIC Codes.
In the money vs. out the money
In the money causes our share count to rise when converted over. Out the money has no affect on our share count.
When does dilution typically occur
Dilution typically occurs when securities are converted over from employee options or SBC. Usually triggered by a vesting period and a in money situation.
Basic Shares where can you find it
You can find it on the front of the 10k or most recent filling
Fully diluted Shares where can you find it
You have to count this your self and it usually occurs when you take the basic shares + the in the money options = Fully diluted Shares aka treasury stock method
What is the Treasury stock method
A way of finding the Fully diluted Shares outstanding of a company, but assuming when you exercise your options, the money paid for the options to the employer will get used to buy shares of the company and anything left over they will use cash to buy the remaining shares.
What is the Earnout Provision
The idea is the acquirer gets the management team to stay on to help run the business for a period of time, paying them a fee as well.
Apon change of control all stock options are what ?
Exercised and vested.
What does Wall street Value 1 thing
1) Growth!! Revenue Growth, EBITD Growth, EPS Growth all important
What does Wall street Value the 2nd thing
2) Risk = How they have been performing on a. cash flow basis. Is it steady growth or choppy waters when it comes to these things. Steady
