Question

Suggest and explain the best valuation methods for valuing the following

1) Private companies
2) Financial services (Banks etc)

explain why

Valuation using anything such asmultiples/DCF/DDM.

working out the value of private firms - what is the best technique?

Answer 1

1. Private Companies Valuation:

Comparable Company Analysis (CCA):

CCA methods operates under the assumption that similar firms in the same industry have similar multiples. We search company to our target valuation and determine the value of the target firm using the comparables firms multiples. This is the most common private company valuation method

Discounted Cash Flow (DCF) Method:

The DCF methods takes the CCA method one step further. Under DCF method, we start by determining the applicable revenue growth rate for the target firm. We then make projections of the firms revenue, OPEX, taxes etc and generate free cash flows of the target firm.

2. Financial Services Valuation:

Bansk are usually valued based on their Price to Book Value which gives an investor a greator sense of safety when investing. P/B ratios are often used to compare banks and insurance companies because most assets and liabilities of these companies are constantly valued at market values.