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The concept of an LBO transaction is simple – private equity buys a company, fixes it up, repays its debt and then sells the company for a higher price to earn the profit. CapitalStructure of an LBO. The acquisition transaction value was around US$ 43.8 References. Chambers, D. Alternative Investments: CAIA Level I.
Analysts use financial metrics and multiples such as Price to Earnings (P/E), Price to Book (P/B), Enterprise Value to Sales (EV/Sales), Enterprise Value to EBITDA (EV/EBITDA), and Price to Book (P/B) ratios derived from trading data of similar public companies or deal pricing data of similar M&A transactions.
It is typically the highest risk/highest potential return portion of a company’s capitalstructure. Multiple of Earnings Multiple of Earnings, similar to Multiple of EBITDA, refers to the multiple of a company’s earnings to establish the entity valuation of the company.
These cash flows typically include operating income, tax payments, and changes in working capital and capital expenditures. b) Determining the Discount Rate: The discount rate, often the weighted average cost of capital (WACC), reflects the risk associated with the company’s cash flows.
These cash flows typically include operating income, tax payments, and changes in working capital and capital expenditures. b) Determining the Discount Rate: The discount rate, often the weighted average cost of capital (WACC), reflects the risk associated with the company’s cash flows.
They provide insights into the financial position, capitalstructure, and overall worth of the business. The Comparable Company Analysis (CCA) compares key financial ratios and multiples, such as price-to-earnings (P/E) ratio or enterprise value-to-sales (EV/S) ratio, of similar publicly traded companies.
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