There are generally four methodologies that buyers apply in corporate M&A valuation:

1. Discounted Cash Flow (“DCF”) Analysis;

2. Precedent M&A Transactions for comparable companies;

3. Comparable Company Trading Analysis; and

4. Leveraged Buy-Out (“LBO”) Analysis.

Of these methodogies, Buyers typically give DCF Analysis & LBO Analysis the greatest weight as they are the most precise. Both methods incorporate many company-specific factors such as growth rates, future capital requirements, working capital changes, synergies and a host of other factors. However, the two methodologies differ in that an LBO gives a range of values a Buyer can pay to achieve target return thresholds (incorporating leverage and various exit multiple scenarios), whereas a DCF applies a discount rate (which is a function of the riskiness of the asset and the amount and cost of debt expected to be put on the business) to the cashflows of the business to calculate its value to a Buyer.