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M&A Blog #16 – valuation (Discounted Cash Flow)

Francine Way

As I mentioned in my last post, Discounted Cash Flow (DCF) is a valuation method that uses free cash flow projections, a discount rate, and a growth rate to find the present value estimate of a potential investment. It is worth noting that each step can justifiably warrant an entire post in itself.

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Methods and Examples on How to Value a Company

Lake Country Advisors

Below, we’ll delve into several widely used valuation methods, complete with definitions and real-world examples so you can begin mastering them. The underlying principle is that the value of a business is equal to the present value of its expected future cash flows, taking into account the time value of money.

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Vertical Merger Integration: Definition, Legal, and Regulatory Considerations

Peak Frameworks

Valuation Techniques: Employing discounted cash flow (DCF) and comparative analysis to ascertain the target’s value. Synergy Analysis Synergy analysis estimates the tangible benefits of the merger, including cost savings and potential revenue increases, playing a crucial role in justifying the transaction.

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Value – The First Variable in Your Selling Equation

Successful Acquisitions

The first potential problem is that this approach is by definition backward-looking. A third potential problem is the definition of the word “comparable”. The third and final approach that I’ll discuss is the Discounted Cash Flow (“DCF”) Approach.