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Our goal with the following case study Is to provide Insight Into the challenges of valuing assets and to share a variety of best practices from real-world scenarios.
Valuing investments in private companies requires a flexible approach. Each situation is unique. Our goal with the following case study is to provide insight into the challenges of valuing these assets and to share a variety of best practices from real-world scenarios. Though we use a generic comprocess pany Corp"-the name-in transactional details come this case and directly "Auto-Supply valuation- from our experience. The Auto-Supply Corp case explores ways to approach valuing a minority shareholder's stock holdings a private company given limited publie information and financial statements, This case features a reverse auction, two special dividends, recapitalization through a term loan, and SOmewhat volatile industry multiples. It IS a . , c , , , * prime example Oí the Valuation ChaiiengeS that minority shareholders Can . . , encounter when an active majority shareλ λ rr . .r. , . λ * holder atteCtS Significant Capital Changes ancJ οη[? limited information IS avail. . , , . . able tO minority shareholders.
This case highlights a valuation analysis where traditional application of the income and market approaches is either limited or not available, emphasizing the need to explore other potential indicators of value. One place to look for clues is the company's financing activities. From these transactions in the capital structure, we were able to derive significant information about the enterprise and equity value of the company at different points in time, despite having no insights to the financial projections looking forward.
Applicable valuation considerations
The following list highlights valuation considerations applicable in the Auto-Supply Corp case. This wide range of issues should be considered at the outset in order to successfully synthesize the character of the security in the context of its history, its fact set and features, its relative sensitivity to key input estimates, and its overall quality of information. By framing the security in this manner, we can assess the valuation approaches most relevant to Auto-Supply Corp. The contextual framework also makes clear the inputs that would be required of a particular approach and how uncertain, as well as sensitive, such...