Comments on: Alternative Financial Valuation Concepts http://www.financialmodelingguide.com/valuation-concepts/alternative-financial-valuation-concepts/ Free online resource for financial modeling advice, tips and tricks Tue, 13 Jul 2010 17:29:24 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Financial Modeling Guide http://www.financialmodelingguide.com/valuation-concepts/alternative-financial-valuation-concepts/comment-page-1/#comment-20 Financial Modeling Guide Sun, 02 Sep 2007 15:36:06 +0000 http://www.financialmodelingguide.com/valuation-concepts/alternative-financial-valuation-concepts/#comment-20 Agree. Thanks for visiting! Agree. Thanks for visiting!

]]> By: Investment banking monkey http://www.financialmodelingguide.com/valuation-concepts/alternative-financial-valuation-concepts/comment-page-1/#comment-11 Investment banking monkey Fri, 03 Aug 2007 16:30:08 +0000 http://www.financialmodelingguide.com/valuation-concepts/alternative-financial-valuation-concepts/#comment-11 I would also add precedent transactions in addition to traded comps. Control premium is a highly arbitrary and unreliable 'valuation' metric. The 30% premium that us usually taken (based on historical average premia across industries and markets) does not take company specific info into account. Rather than a premium analysis, a more useful tool would be back solving an LBO model to see what a financial sponsor would be able to pay. This is much more informative and also closer to reality. Whilst the premium is what a naive shareholder may wish to get for control, the sponsor's ability to pay is a maximum that someone can actually give for the company. I would also add precedent transactions in addition to traded comps.

Control premium is a highly arbitrary and unreliable ‘valuation’ metric. The 30% premium that us usually taken (based on historical average premia across industries and markets) does not take company specific info into account.

Rather than a premium analysis, a more useful tool would be back solving an LBO model to see what a financial sponsor would be able to pay. This is much more informative and also closer to reality. Whilst the premium is what a naive shareholder may wish to get for control, the sponsor’s ability to pay is a maximum that someone can actually give for the company.

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