UBS Valuation Multiples Primer

 UBS Value Multiples Special primer Essay

Valuation & Accounting

Global

November 2001

Valuation Interminables: A Special primer

Global

Equity

Research

www.ubswarburg.com/researchweb

In addition to the

UBS Warburg web site

our research products can be found

over third-party systems

provided or maintained by:

Bloomberg, First Call up, I/B/E/S, IFIS,

Multex, SPEEDY and Reuters

UBS Warburg is a organization

group of UBS AG

Valuation Primer Series

Peter Suozzo

+852-2971 6121

в–

peter. [email protected] com

Stephen Cooper

+44-20-7568 1962

в–

sophie. [email protected] com

Issue you

This is the initial in a group of primers about fundamental valuation topics such as discounted income, valuation interminables and expense of capital. This document clarifies how to compute and use multiples widely used in collateral analysis.

Gillian Sutherland

+44-20-7568 8369

gillian. [email protected] com

Zhen Deng

+1-212-713 9921

zhen. [email protected] com

в–

We discuss the differences between equity and enterprise interminables, show how target or perhaps ‘fair' multiples can be produced from underlying worth drivers and discuss the ways multiples can be utilized in value. For each multiple, we display its derivation, discuss the strengths and weaknesses, and suggest ideal use.

Value Multiples: A Primer The fall of 2001

Articles

Peter Suozzo

+852-2971 6121

peter. [email protected] com

Sophie Cooper

+44-20-7568 1962

sophie. [email protected] com

Gillian Sutherland

+44-20-7568 8369

page

An Introduction to Interminables........................................................................... 3 — What Is a Multiple?......................................................................... 3 — Advantages/Disadvantages of Multiples........................................... three or more — Venture versus Fairness Multiples................................................... a few — For what reason Multiples Change......................................................................... 5

gillian. [email protected] com

Zhen Deng

+1-212-713 9921

zhen. [email protected] com

— Choosing the Costs Date............................................................. twelve Target Value Multiples........................................................................... 13 — What exactly Target Multiple?............................................................. 13 — Single-stage Concentrate on Multiples........................................................ 18 — Two-stage Target Many........................................................... 15 — Examples..................................................................................... 18 — Assumptions Used in Focus on Multiple Formulations.............................. 17 — The Effect of Growth on Value....................................................... 18 Using Valuation Multiples............................................................................ twenty Enterprise Worth Multiples........................................................................... twenty four — What Is Enterprise Value?............................................................. 24 — Why Use Business Value Many?............................................ 25 — Potential Problems in Establishing EV............................................. 21 — Venture Value Many............................................................. 28 Fairness Multiples.......................................................................................... 37 — Exactly what Equity Many?........................................................... 37 — Equity Multiples............................................................................ 37 Appendix: Derivation of Target Multiple Formulas......................................... 42

For study, valuation models and more upon equity evaluation go to the Global Valuation Group website...

www.ubswarburg.com/research/gvg

2 UBS Warburg

Value Multiples: A Primer November 2001

Section 1

An intro to Many

This doc...