Page 51 - FINAL CFA II SLIDES JUNE 2019 DAY 6

EXAMPLE: Ken Lloyd, has been retained by the GEC
Company to estimate a fair price for the proposed READING 25: MERGERS AND ACQUISITIONS
acquisition of the PSC. Lloyd decides to use CTA to value
PSC and has gathered information concerning recent MODULE 25.3: TARGET COMPANY VALUATION
M&A transactions in the industrial equipment industry as
below. Calculate the appropriate valuation metrics and
using the mean of those metrics, and estimate the
price that GSE should pay for the PSE.
Step 3.2: Apply to target firm.

Answer: Step 1: Identify a set of recent takeover transactions –Done1!
Step 2: Identify a set of recent takeover transactions.

Fair price to pay for
control of Peerless Saw.

Why no transaction premium?

Step 3.1: Calculate descriptive statistics for the relative value metrics
As we are using M/A deal transactions, these should have already been
incorporated into the prices paid in those deals…