*Valuation Terms*

**APV approach:** A multivariate model for estimating the cost of equity capital, which incorporates several systematic risk factors.

**Book Value:** Book value is the net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

**Break-Up Valuation Analysis:** Break-up valuation is the central technique used in all types of transactional restructurings, specifically all transactions that involve any types of divestitures.

**Comparable Company Analysis:** Comps or Comparable Company Analysis involves identifying valuation multiples from comparable listed companies and applying these to the financials of the company to be valued.

**Comparable Transaction Analysis:** Comparable transactions analysis or analysis of selected acquisitions is very similar to trading comps except deal comps utilize actual transaction multiples instead of trading multiples from the universe of comparable private companies. The analysis uses multiples and premiums paid in comparable transactions to value target private companies.

**Comps:** See Comparable Company Analysis.

**Deal Comparables:** Deal comparables (or “deal comps”) are comparable M&A transactions used to help value a current similar M&A transaction.

**Discounted Cash Flow (DCF) Valuation Approach:** Discounted Cash Flow (DCF) valuation is a method of valuing a company using the concept of the time value of money. All future cash flows are estimated and discounted to give their present values. The sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question.

**Down Round:** A down round is a round of financing where investors purchase stock from a company at a lower valuation than that by earlier investors.

**Enterprise Value Multiples:** A ratio used to determine the value of a company. The enterprise value multiple looks at a company as a potential acquirer would, because it takes debt into account – an item which other multiples like the P/E ratio do not include. An example of an enterprise value multiple is EV/EBITDA.

**Equity Value:** Equity Value is the value of a company available to shareholders. It is the enterprise value plus all cash and cash equivalents, short and long-term investments, and less all short-term debt, long-term debt, and minority interests.

**Firm Value:** See Enterprise Value.

**Flat Round:** A flat round is a round of financing (usually venture capital financing) where investors purchase stock from a private company at the same valuation as the valuation placed upon the company by earlier investors.

**Liquidation value:** The net amount that would be realized if a business is discounted and its assets are sold individually. The appropriate bases of value and any appropriate additional qualifying assumptions should also be stated.

**Market Cap / Market capitalisation:** Market Capitalization is the share prices times the number of shares outstanding for a publicly traded company.

Market Capitalization Market capitalization is an on-going market valuation of a public firm (whose shares are publicly traded) computed by multiplying the number of outstanding shares (held by the shareholders) with the current per share market price. It is, however, not necessarily the price a buyer would pay for the entire firm. Market capitalization is not a realistic estimate of the firm’s actual size, because a share’s market price is based on trading in only a fraction of the firm’s total outstanding shares.

**Multiples Valuation Approach:** The Multiples Valuation Approach is a valuation theory based on the idea that similar assets sell at similar prices. It assumes that a ratio comparing value to some firm-specific variable (operating margins, cash flow, etc.) is the same across similar firms.

**Post-money Valuation:** Post-money valuation is the value of a company directly after an equity investment in the company is made, i.e. pre-money valuation plus the equity investment amount.

**Pre-money Valuation:** Pre-money valuation is the value of a company just before an equity investment in the company is made. The valuation is agreed upon between investors preparing to participate in a new funding round and the company. It is used to determine the price per share to be paid by investors in the new funding round (subscription price).

**Precedent Transaction Analysis:** Precedents or Precedent Transaction Analysis involves identifying recent acquisitions in the same sector and applying the multiples from these transactions to the financials of the company to be valued.

**Private Company Valuation:** Valuation is a process used to determine what a business is worth. Determining a private company’s worth and knowing what drives its value is a prerequisite for deciding on the appropriate price to pay or receive in an acquisition, merger transaction, corporate restructuring, sale of securities, and other taxable events.

**Private Company Valuation Techniques:** Private companies have major importance in the world’s economy albeit often smaller in size and less financially transparent than their publicly traded peers.

**Trading Multiple Analysis:** Comparable company trading multiples analysis or trading comps use the valuation multiples of similar or comparable publicly-traded companies to value a target private company. Peers can be grouped based on any number of criteria, such as industry focus, private company size, or growth. The multiples can be Enterprise Value (EV) based multiples like EV/Sales, EV/EBITDA or EV/EBIT, and Equity-based multiples like Price to Earnings (P/E). The multiples derived from this type of analysis are at a given point in time and generally change over time. It is important to note that trading multiples do not reflect control premiums or potential synergies.

**Valuation:** Valuation is a method of determining the current worth of an asset or company; an appraisal of value using various techniques which include analysis of financial statements, management profiles, competitive space, industry, and markets. Valutico is your tool to perform these valuations more effectively.

**Valuation Methodologies:** Private companies may manage their balance sheets and earnings for alternative purposes, discounted cash flow analysis or comparable valuation techniques require additional research. Earnings and capital structure might need to be reorganized or modified accordingly. When it comes to private companies, some nontraditional valuation techniques may be appropriate such as analysis of invested capital, replacement cost, asset appraisal and capitalization of earnings.

**Valuation of Private vs. Public Companies:** Private company valuations are discounted based on several risk factors associated with private sector investment, which results in a marked difference between the valuation of a privately held company, subsidiary or a division and a publicly traded corporation. There is a number of distinctions between private and public companies that have an impact on the private company’s value.