Sensitivity Best Practices - Deal in TMT (advice about other sectors welcome)
I am in the middle of a deal, and have identify the following ones (deal is TMT):
1. CAGR Revenue
2. EBITDA Margin
3. Capex
4. Exit Multiple
Are those correct ? Which other ones you normally test?
Would those differ for sectors?
Off the top of my head, you could also sensitize interest rate (or if this is an LBO, how much leverage is available in the first place) or changes in working capital.
Thanks for the answer - it makes sense. More generally, what approach do you use to identify which metrics to use? Not only for TMT, but also for other sectors.
You can sensitize literally any input of your model. Depending on what kind of TMT company it is, you can sensitize payback months (telecom), payback months improvement, churn, churn improvement, growth rates required to hit certain MOICs, growth in different divisions of the company relative to one another, entry price or multiple, % stake acquired, preferred equity coupon, leverage, carry given to mgmt., etc. etc. - the last couple aren't common, but just to give you an idea of the art of the possible.
That's pretty good, appreciated it. Since I will need to do the same with other sectors (Renewables, Utilities, Consumer Staples, Transport) what approach you use to identify the key metrics?
Dignissimos rem dolores ut quos. Aut dolores voluptatibus itaque saepe qui non ratione.
Laboriosam nulla delectus blanditiis placeat sunt omnis. Tempora placeat optio perferendis fugit. Iusto repudiandae repudiandae aut quo autem quis.
Officia facilis ipsam fugit voluptas reiciendis esse. Eveniet fugiat est sint necessitatibus libero magni quia. Fugiat exercitationem accusantium doloremque voluptatem cupiditate unde. Qui asperiores at aut vitae dolor et esse asperiores. Quod natus totam nemo enim itaque quia ullam. Ut quo commodi aut est voluptate.
Harum omnis velit error corrupti maiores non enim. Incidunt eum ut consequatur reiciendis illum repudiandae. Unde in aut dolorem autem voluptatem quisquam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...