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M&A Blog #22 – valuation (less known valuation methods)

Francine Way

Thus far, we have covered four popular valuation methods in M&A (DCF, Comparable Company, Precedent Transaction, and LBO) and one less known one that is making its way out of the academic realm into the business world (Dividend Discount Method, DDM).

Valuation 130
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What is Cash Flow from Operations (CFO)?

Peak Frameworks

Cash Flow from Operations in Valuation Models Valuation models such as the Discounted Cash Flow (DCF) model use CFO as a key input. For example, Alphabet's (Google's parent company) consistently strong CFO has been a positive indicator in DCF models and has contributed to its high valuation.

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Vertical Merger Integration: Definition, Legal, and Regulatory Considerations

Peak Frameworks

Notable Examples Several high-profile vertical mergers have reshaped industries, such as the acquisition of Pixar by Disney , integrating content creation with distribution channels, and Amazon’s purchase of Whole Foods , linking retail distribution with a leading online platform.

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Growth Equity: The Child Prodigy of Private Equity and Venture Capital, or an Artifact of Easy Money?

Mergers and Inquisitions

Growth equity firms could invest in any industry but tend to be skewed toward technology and TMT , with some exposure to consumer/retail , healthcare , and financial services. Financial Modeling: Like private equity, 3-statement models are common, as are valuations and DCF models , but LBO models are less common since not all deals use debt.

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Project Finance vs. Corporate Finance: Careers, Recruiting, Financial Modeling, and More

Mergers and Inquisitions

The skill set in PF/Infra is more specialized because modeling Power Purchase Agreements (PPAs) for a solar plant doesn’t translate that well into valuing a consumer/retail company. Outside of LBOs, this Exit Value or Terminal Value concept is widely used in other corporate finance analyses, such as the DCF model.

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Capital Markets vs. Investment Banking: Deals, Careers, Recruiting, Exits, and Offer Decisions

Mergers and Inquisitions

You’ll also have to spend time learning/reviewing the technical questions, as the day-to-day work in ECM and DCM is far removed from subjects like Equity Value vs. Enterprise Value or a DCF model. You also pitch prospective clients on deals and spend time learning your industry. Should You Accept a Capital Markets Internship or Job Offer?

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The Search Fund Internship: Perfect Pathway into Investment Banking and Private Equity Roles?

Mergers and Inquisitions

You can think of a search fund as a private equity firm meets a SPAC , minus the celebrity sponsor who’s there to swindle retail investors. For example, you could take one of the companies you found in the screening process and build a simple 3-statement model and DCF model for it.