Link Between Business Model And Valuation The focus of any company is to either gain a competitive advantage or maintain their competitive advantage. A company with a competitive advantage over its rivals generates higher shareholder returns. In addition, employees often like to work in these organizations, and customers are happy with their services. Thus, investors who…

Valuing Apple’s Crown Jewel — iPhone Product Apple’s stock price and market cap had a mixed run this year. While the increase in interest rates due to rising inflation has impacted its iPhone sales, especially the iPhone 14 model, it is also facing supply chain issues. With China particularly severe to contain COVID and to have zero…

Stock-Based Compensations and Adjustments on EBITDA This week, Oyo drafted an addendum to its earlier red herring prospectus to SEBI, where the firm had arrived at an adjusted EBITDA of Rs.10.6 crores communicating to its investors that it has become profitable. So has OYO become a cash-generating entity? Instead, when we look at their income statement…

Organic Or Inorganic Growth? How To Decide Last week, Adobe announced that it would acquire Figma for $20 billion, and this deal announcement declined Adobe’s market cap by $34 billion. The decline in Adobe’s share price is mainly centred on the deal purchase price at 50x Figma’s 2022 ARR, implying that Adobe has overpaid. However, before judging…

Purchase Price Adjustments in M&A Transactions In an M&A deal, purchase price/headline price is the most crucial factor for the transaction for buyers and sellers. However, the seller does not get the headline price after the deal closes, and there are many adjustments that sellers must be aware of while consummating the transaction. In this post…

Synergy Trap In Mergers And Acquisitions With interest rates rising to counter growing inflation and economies in developed countries (the US and Europe) moving to a slowdown/recession, how will the volume of M&A deals get affected? To understand how well the M&A activity evolves forward, let us review the economics of M&A decisions and how the…

Leveraged Buyouts and Private Equity Financing Leveraged Buyout is a commonly used deal structure used by Private Equity firms or firms’ management by taking the firm private and financing the transaction through leverage. Anyone who has worked in Private Equity or acquired a portfolio company or PE firm would have dealt with LBO deals. At the…

Why do most Venture Capital Funded Start-ups shut down? 9 out of 10 start-ups fail but what is surprising is that 75% of VC-backed start-ups fail because we assume that VC firms are seasoned investors with experience, expertise, and resources to evaluate the potential of the start-ups before funding. This post will provide the main reasons why most venture…

Game Theory In The Costs Of Financial Distress Companies generate maximum shareholder value for their investors when their investment, financing, and dividend policies are optimal. In this article, i discuss the financing strategies which determine the firm’s optimal capital structure. As interest expenses on debt are tax-deductible, cash flows to equity increase when firms finance a part of…