Permanent Podcast: Real Talk About Private Equity and Buying, Selling, and Operating Small Businesses

Financial Structures: Financial Structures & Valuation (EP.16)

Sep 23, 2019

Exploring the complexities of business valuation, including the use of multiples, present value of future cash flows, financial structures, and managing expectations in the market. Highlights the importance of understanding business value and transfer risks in the private equity market.

15:00

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Quick takeaways

Valuation is a complex process that involves various factors such as financial structures and terms and conditions, often overlooked by the headline valuation.

Different financial models like multiples of e-bit-dah and discounted cash flow can be used to determine the present value of future cash flows and estimate the valuation of a business.

Deep dives

Valuation Complexity

Valuing a business is anything but straightforward, as it involves factors such as the amount of money traded, ownership level, terms and conditions, and various financial structures. The headline valuation often ignores crucial details, such as liquidation preferences, preferred returns, and debt. Details matter, and the same headline valuation can significantly differ based on the specific terms and conditions.

Introduction

2min

Understanding Present Value of Future Cash Flows and Multiples in Business Valuation

4min

Understanding Financial Structures and Valuation

3min

Understanding Multiples and Managing Expectations in Financial Structures and Valuation

2min

Understanding Business Value and Transfer Risks in the Private Equity Market

4min

When people hear about a transaction the first question they ask is: "What is the valuation?" While the answer seems simple on the surface - a single number - the way valuation is decided can take many different paths. In this example-packed episode, we show the diversity of approaches taken towards valuation and talk about why methodology matters. Discussion with Brent Beshore and Emily Holdman starts @ 8:18.

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