
Valuation of Late-Stage Companies and Bu...
Chaplinsky, Susan;...
Valuation of Late-Stage Companies and Buyouts
Chaplinsky, Susan; Khetrepal, Shikha
F-1639 | Published March 15, 2011 | 27 pages. Technical Note
Collection: Darden School of Business
Product Details
This note focuses on the valuation of late-stage companies with a particular emphasis on leveraged buyouts (LBOs). In addition to LBOs, late-stage investments can arise in situations involving growth equity, turnarounds, mezzanine investments, and distressed debt. In contrast to venture capital, where firms are typically at an early stage of development, late-stage investments involve more established businesses that have an ability to take on higher levels of leverage to augment investor returns. While in practice there are several approaches to valuation, the approach chosen often comes down to which provides the most accurate representation of the situation and perspectives of the parties involved. This note takes the perspective of a PE investor and assumes some basic familiarity with the structure of PE investing. It provides a basic overview of the primary sources of financing and the metrics used to gauge LBO capital structures and a step-by-step example of an LBO analysis.
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