Best But Never Final: Private Equity's Pursuit of Excellence Private Equity Valuation: Academia vs. Reality
Nov 11, 2025
Discover the intriguing divide between academic valuation theories and the real-world practices of private equity. From the limitations of DCF models to the nuances of LBO frameworks, the hosts dig into why market data often trumps theoretical models. The discussion touches on deal psychology, the impact of credit availability on valuations, and how tailored financial models can reveal deeper insights. Dive into the fascinating world of valuation, where execution and market understanding are as crucial as the numbers themselves!
AI Snips
Chapters
Transcript
Episode notes
Academic Valuation Pillars Have Limits
- Academia emphasizes DCF, public comps, and transaction comps as valuation pillars.
- These frameworks force discipline but often miss market realities and practical exit assumptions.
Terminal Value Skews DCFs Heavily
- Terminal value dominates five-year DCFs and injects false precision.
- DCFs are useful for discipline but fragile when used to derive precise prices.
LBO Models Mirror Market Reality
- LBO models are more market-based because they use real-world capital structures and exit multiples.
- They align valuation with what lenders and markets will actually permit today.