WST: 4.1 Investment Banking Training - Basic Valuation Methodologies

Wall St. Training Self-Study Instructor, Hamilton Lin, CFA reviews the basic valuation methodologies utilized by investment bankers and professionals to value companies, ranging from trading comps to deal comps to DCF to break-up analysis and other metrics.

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Wall St. Training Self-Study provides online, video-based, self-study financial modeling training solutions to Wall Street. Our interactive course modules are Excel-based and specialize in advanced and complex financial modeling, valuation modeling, investment banking, mergers & acquisitions and leveraged buyout training topics. Enhance your skills and master the content required by Wall Street investment banks, M&A, research, asset management, credit, and private equity firms.

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Closed Caption:

hello and welcome to washington trainees
module on corporate valuation
methodologies my name is Hamilton Lane
president and founder of washing
training and I the background investment
banking
and mergers and acquisitions had what
they call me sex is the best banking
research
bankamerica securities is mergers and
acquisitions group except other boutique
investment bank
of August on mergers and acquisitions
please note that these materials are
copyrighted
and may not be disseminated reproduced
without express written approval from
this on our salsa basic valuation
methodologies
on the one hand we have basic
training cops training costs are now so
just like a publicly traded companies
with this the means is you take a look
at the car it publicly traded
competitors
and you see what the value of the market
is
what the value the market is placing on
these companies are at that particular
moment
then you take those multiples that are
implied from the car observations that
you make up the open market
then you go and apply the same by wish
multiples metrics upon the company you
are trying to analyze
we will see actual live examples of this
also the ideal cops
these new cops are similar process as
the train comes
except instead using publicly traded
primes as a competitor
what we're going to use it let's take a
look at previously announced
acquisitions in your sector
in addition we look at discounted cash
flow analysis into this kinda cash for
now says
what that does is we will see how much
we believe the intrinsic value
our friend is going to be intrinsic
value you can also say that the chain
constant Yukon sport that he's on top as
well we'll call
relative valuation it's called Delta
violation because we're looking at our
competitors and sing on a relative basis
how much you will be what both at this
kinda cash flow and lb announces
what we will call fundamental analysis
in this fundamental now says as well as
a breakup analysis
all we're trying to figure out is
fundamentally what it was the lead the
value the firm will be
leverage by analysis is also somewhat
similar
nevers bioanalysis takes a look at the
core profitability and the corporeal
companies
to generate cash flow and it's it let's
take those cash flows
levered this company up a great deal
used in 20 Johnny Cash's
to pay down the debt hence billion
equity who have a brief discussion
abused boys and this particular module
for more information on leveraged
buyouts
as well as a fuller explanation of the
things you must consider when building a
leveraged buyout model please refer to
our module
title lb overview in addition we also
have a breakup analysis
in this break now says what we would do
is we'll take a look at
a conglomerate for instance and we'll
break up it went into business units
it to disparage pieces a business's
Francis you want to try to buy off from
like gee
how would you do that there is no want
the competitor actually built
%uh engines for planes as well as our
consumers for credit card this was like
balls washing machine
center so from that perspective will be
very difficult if not impossible to
pinpoint
a very good compared to use for %uh
comparisons
against GE sewn up it's a good case what
you might do with you my separate and
break apart each one up GE's this para
businesses
value each one of their business is
based on a previous methodologies
and in some the month therefore this
breakup announces also call some the
parts valuation
finally you also get ass a violation if
you have
a company who has specific hard tangible
assets presence we find his car
manufacturing plant at cetera
warehouses you might be to take this and
say okay if there's
actively market traded for these
particular type that tangible assets
that you can split apart from the
business
then let's go and see if we were to bill
all that up from scratch how much with
this from you what
is another common another book that i
won at the and this book
forward hawaii's right in the works as a
big bullet
distressed up restructuring
turnaround
or
liquidation e24 very similar to it
the to each other but they are not on
the sly for specific reason
because what we are trying to value is
the value of the company
as a going concern study one week it
will be around
they are not any financial trouble get
not to stress tonight it was tricky
situation
did not return download and not a
liquidation after a bankruptcy
so from that perspective just keep in
mind to hear that its entire separate
entirely separate discussion on how to
buy distressed restructured companies
so for now for this particular model we
will focus on
ongoing runway comment valuation affirm
and will apply each of these valuation
methodologies on top about from that
we're going to