Module II· Interview Essentials — ValuationBasic
Question
What are the three main valuation methods, and how do they typically relate to each other?
Answer
Standard methods
- DCF: intrinsic, based on future FCFs
- Trading comps: market-based, public peers
- Precedent transactions: M&A-based, historical deals
Typical hierarchy
Precedents > trading comps (because of the 25–35% control premium).
DCF is variable — it depends on the assumptions, often in the middle or setting the range.
Output convention
a Football Field with a range per method.
Buyer differentiation
- Strategic buyer: synergies on top → highest valuation
- Financial/PE buyer: DCF/comps range, synergies limited
Important
When the methods diverge widely, question the methodology rather than 'massaging' the valuation.