EBITDA (Earnings before interests, taxes, depreciation and amortization) is equivalent to Gross Operating Income (in Spanish, Resultado Bruto de Explotación) because it reflects the excess of operating income over expenses related to those revenues in a period of time and, it is commonly used as a multiple to valuing companies. It is a measure that normally is [...]
From an economic point of view, a company creates value when the business generates greater income than the costs of producing it, including charges for capital allocation. To create value, managers must have a thorough understanding of the performance of variables that significantly affect the value of the business which in the end is reflected [...]
The comparable model is a relative valuation approach. The basic premise of the comparables approach is that an equity’s value should bear some resemblance to other equities in a similar class. For a stock, this can simply be determined by comparing a firm to its key rivals, or at least those rivals that operate similar businesses. There are [...]
As the old adage states, "a business is only worth what someone is willing to pay for it". However the process of maximizing the value of a company for the shareholders on exit has numerous factors which can be evaluated and controlled. Let´s see some of them. Supply & Demand By the supply side, if [...]
Value drivers are characteristics of a business that either reduce the risk associated with owning the business or enhance the prospect that the business will grow significantly in the future. An improvement in the performance of the value drivers can significantly increase the value of the company and facilitate the sale at a highest range [...]
In the last 40 years the development of technology and telecommunications led by entrepreneurs has deeply transformed our lives. In many cases, companies started by young entrepreneurs surpassed others that until then had been leaders of their sectors. These entrepreneurs were motivated by innovation and risk-taking, even shifting the focus of governments on how economic [...]
The term Enterprise Value (EV) (1) is frequently used when discussing the valuation of a company. A widely used valuation multiple is EV / EBITDA (2). EV represents the total value of a company including both its equity and its debt. When someone says that he or she sold the business for $ 40 million, we do [...]
We frecuently read announcements of millionaire acquisitions by big companies but we know little about if the strategy of acquisitions of a company will produce profits in the long term. Despite the excess of opinions, there seems to be little thoughtful analysis regarding the principles and strategies behind these acquisitions. Successful M&A Processes In 2011, [...]
EBITDA (*) is often taken as an approximation of the operating cash flow of a company and is used as a magnitude to value a business by applying a multiple (eg 3 X EBITDA). Normalizing EBITDA to be a representative indicator of the value of the company makes sense. An experienced buyer will go beyond [...]
A selling transaction for a company typically follows a process similar to that of a private auction. Selling a business normally considers the following stages: a) Defining the exit strategy; b) Determining the value of the company; c) Preparing the information; d) Promoting the transaction; e) Negotiating and carrying out the due diligence and f) Closing of the transaction. Defining the exit strategy [...]
