Approaches to the valuation of non-public companies
Posted: Tue Jan 21, 2025 5:00 am
Half of them were to be converted into real shares in two stages: after two years and then after five years, provided that the company's cash flows grew by 10% annually.
The remaining "ones" were converted only if GE shares saudi arabia telegram number database outperformed the S&P 500 index over the same time periods.
If the company is not publicly traded, one of the key issues is assessing the overall value of the company, which is obviously necessary to assess the current value of any block of shares.
The most conservative approach relies on the valuation of the company that was used in the last round of equity financing or buyout.
The disadvantage of this method is that from the moment of the transaction, the indicators, and therefore the fundamental value, of the company can change, both upward and downward. Thus, the key principle of the motivation system using share capital is violated - interest in the growth of the company's value.
An alternative method involves using current (or average for the period) financial results, such as EBITDA (earnings before interest, taxes, depreciation and amortization) and a multiple of the enterprise value to EBITDA.
The remaining "ones" were converted only if GE shares saudi arabia telegram number database outperformed the S&P 500 index over the same time periods.
If the company is not publicly traded, one of the key issues is assessing the overall value of the company, which is obviously necessary to assess the current value of any block of shares.
The most conservative approach relies on the valuation of the company that was used in the last round of equity financing or buyout.
The disadvantage of this method is that from the moment of the transaction, the indicators, and therefore the fundamental value, of the company can change, both upward and downward. Thus, the key principle of the motivation system using share capital is violated - interest in the growth of the company's value.
An alternative method involves using current (or average for the period) financial results, such as EBITDA (earnings before interest, taxes, depreciation and amortization) and a multiple of the enterprise value to EBITDA.