Capitaliq Tutorial

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CAPITAL IQ 202
M&A TRANSACTION SCREENING

January 31, 2012

© Margolis Market Information Lab

CIQ202

PREREQUISITES
• Capital IQ 101
– Tearsheets – Screening – Formula Builder – Excel Plug-in

January 31, 2012

© Margolis Market Information Lab

CIQ202

AGENDA
• Mergers and Acquisitions


• •

Valuation
Capital IQ Screening Applications of Capital IQ Screening

January 31, 2012

© Margolis Market Information Lab

CIQ202

MERGERS AND ACQUISITIONS
• Mergers and acquisitions significantly influence financial markets – Deals can range from millions to billions of dollars – Success of deal will determine success or failure of both companies and management



M&A deals have two types of buyers:
– Financial buyer
• Acquires company for financial gain • Usually describes private equity firms • Believes target is undervalued

– Strategic buyer
• Acquires company for strategic reasons (access new markets, synergies, growth, etc.) • Done by firms in similar operating industries • Will pay a control premium for target firm

January 31, 2012

© Margolis Market Information Lab

CIQ202

M&A – VALUATION
• In addition to financial or strategic reasons, buyers only acquire firms for the right price – Necessary to determine a fair valuation for the target firm



Valuation Techniques
– Discounted Cash Flow
• Determines intrinsic value of firm based on projected future cash flows

– Trading comparables
• Look to similar firms’ trading information to determine an implied value for your target firm

– Precedent transactions
• Look for historical transactions that are similar to your deal

January 31, 2012

© Margolis Market Information Lab

CIQ202

VALUATION – MULTIPLES
• Valuation multiples attempt to capture a firm’s operating and financial characteristics in a single number, to be multiplied by a financial metric (e.g. EBITDA) to yield an equity or enterprise value – Ex: Value of company = Company’s EBITDA * EBITDA Multiple



Enterprise value reflects the value of the whole business, relevant to all stakeholders Equity value reflects the value of equity, relevant to only stockholders



January 31, 2012

© Margolis Market Information Lab

CIQ202

COMMON MULTIPLES
ENTERPRISE VALUE MULTIPLES
• • • • EV/EBITDA EV/EBIT EV/Sales EV/Unlevered FCF

EQUITY VALUE MULTIPLES
• • • Price/EPS (P/E) Equity Value/Book Value P/E/Growth (PEG Ratio)

January 31, 2012

© Margolis Market Information Lab

CIQ202

PRECEDENT TRANSACTION ANALYSIS
• Look for recent transactions that have occurred in your company’s space, similar to your deal, and identify the appropriate multiple to imply a valuation Criteria to consider: – Financial similarities

• Size (Revenue, net income, EBITDA, etc.) • Risk (Leverage, margins) • Growth (P/E ratio, projected revenue, etc.)



– Operational similarities
• • • • Industry Geography Products Customers

January 31, 2012

© Margolis Market Information Lab

CIQ202

PRECEDENT TRANSACTION ANALYSIS
• Valuation Results
– May yield higher valuations due to control premiums and synergies



Remember:
– Comparables will rarely be perfect – Two factors that are not exactly the same does not render the comparison irrelevant – Valuation is an art, not a science

January 31, 2012

© Margolis Market Information Lab

CIQ202

CAPIQ SCREENING
• Hover over “Screening” tab, and then click on “Transactions”



Using precedent transactions, value a target metals and mining company (EBITDA of $10M)

January 31, 2012

© Margolis Market Information Lab

CIQ202

BUILD THE SCREEN
• Merger/Acquisition type transactions


• •

Primary industry classification (target) in metals and mining Transaction closed within the last 12 months Target EBITDA at deal announcement between $8M and $40M

January 31, 2012

© Margolis Market Information Lab

CIQ202

EDIT THE SCREEN
• Results did not...
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