Bharti Airtel and Zain Africa recently announced signing of the definitive merger agreement, wherein Bharti will acquire
African operations of Zain Group. The deal was valued at an enterprise value of USD 10.7 billion or on an 8.2x EBITDA
Multiple. Goldman Sachs has invested USD 450 million in online social networking portal Facebook, which is valued
as the number one social networking network at USD 50 billion. At an enterprise value of USD 50 billion, Facebook is
trading at a multiple of about 100 times of its earnings. Newspapers and television channels make it their headlines
whenever a major deal (private equity, acquisition, etc.) happens. And we normally wonder how these valuations or
multiples were calculated. “What is the worth of my company?†“How much funds can I raise via private placements,
and how much stake I have to dilute?†“How much can I raise from the market if I decide to take my company public?â€
So, whatever the purpose is (acquisitions, private equity, joint ventures, IPOs, etc.), valuation remains the centre of the
talks. The two most common valuation methodologies include (1) Discounted Cash Flows, and (2) Relative Valuation
(Valuation Based on Multiples). Read on to know more… #pdf
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