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Investment Banking
Virtual Internship
Comparables AnalysisBackground Information
Atlas have asked for Citi to provide an indicative valuation of the company based on trading peers and transaction comps for other mobile gaming companies. This will help them establish how much Prometheus should be acquired for. Task Attached is a list of comparable companies and transaction comparables that Citi has on file. However, this file includes comps that are not relevant to this transaction. Please review the two datasets and decide which transaction comparables and trading comparables to include. Using the template provided below, on a PowerPoint slide please show the historical EV / EBITDA’s paid in similar transactions and current trading EV / EBITDA’s of trading comps. Assuming EBITDA of $60m and using the average EV / EBITDA of the trading and transaction comps, what is the implied value of the company? |
Resources
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Method to My Madness: How I Tackled the Analysis
Citi provided EV/EBITDA for 55 companies. For our analysis, we wanted to scrub for the 10-15 companies that best represented our situation. Out of the 55 companies, 21 did not have Last-Twelve-Months (LTV) EV/EBITDA. They only had Next-Twelve-Month. I decided to place more value on track-record than future estimates for this analysis, so I wiped out those 21 from my data set. Out of the remaining 23, 14 were transactional comps, and 9 were trading comps. I didn't want my analysis to be only transactional comps because both were important. So how do I weed out the bad apples from the data set? Using high-school statistics: Median, Q1, and Q3 for the EV/EBITDA values. Values above Q3 and below Q1 were crossed out and considered outliers. This left me with exactly 9 transactional comps. Thank you very much. This meant that I still needed to widdle down my trading comps from a list of 9 to a list of 1-6. Since this analysis was for the purpose of an Acquisition, I decided to use 75% transactional comps, and 25% trading comps in my analysis. This meant I wanted to have 3 trading comps. Why did I choose this ratio? Mostly, I just didn't want to crowd my PowerPoint slide. It was a little arbitrary. How did I get rid of the next 6 trading comps? I got the median, and since it came out very very simlar to the transactional comps median, I decided to just rid away the top 3 comps and the bottom 3 comps. |
The Result
I reached a valuation of $663M, whereas Citi Bank reached an evaluation of $660M. That's a 0.45% margin of error. Not bad.
That's still $3M dollars - which can afford the entire state of Alaska a $4 cup of hot coffee, or a really expensive sports car.
Citi also presented it better, in my opinion. Their chart was split into two and better labeled.
One question that is still on my brain: why did they use so many trading comps over transnational comps in their analysis?
Maybe someone reading this can answer that for me.
That's still $3M dollars - which can afford the entire state of Alaska a $4 cup of hot coffee, or a really expensive sports car.
Citi also presented it better, in my opinion. Their chart was split into two and better labeled.
One question that is still on my brain: why did they use so many trading comps over transnational comps in their analysis?
Maybe someone reading this can answer that for me.
My Analysis
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Citi Bank Model Analysis
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You might not be wondering why I am doing this in the first place. It might lead to a cup of free coffee and this will only take 30 seconds. I graduated with my degree in mechanical engineering about a year ago, and then invested my first year of my freedom into building a tech startup: self-driving warehouse equipment for logistics companies. It failed, and now I want a job. But not just any job. I want a associate consultant/financial analyst position. So if you know someone that might know someone, share this with them, send me a message via my footer, and I'll buy you a cup of coffee ;)