TOOLKITS

Comparable company analysis completion toolkit Universe identication: Check research Look at previous presentations Talk to colleagues / industry teams 10K competition section FactSet, Hoovers etc comparables Shares outstanding: Issued, not authorised exclude the treasury stocks Do not use weighted average number of shares (only used in EPS) Be aware of different classes of shares Be aware of recent stock splits, rights issues, placements Cross check number of shares outstanding against external sources Do not assume external data providers are accurate / up to date Roll forward shares outstanding from last annual report and stock exchange announcements Sanity checks: Check inputs against source Understand the drivers of the multiples cash, risk and growth Understand why companies trade on different multiples: Growth rates Margin development Earnings quality and cash generation Market risk perception Competitive position and sustainability Degree of free oat Broker expectations are not aligned with the market Possible analyst errors Sense check multiples: Forward multiples normally fall PE multiple > EBIT multiple > EBITDA multiple > Revenue multiple Outliers identify and explain Benchmark multiples against brokers Always have latest version of the model with you just in case Know your sources Footnote all adjustments to raw numbers Keep back-up copies of referenced base documents Check, check and check again Think do not just process Stand back and look at the big picture

The Corporate Training Group www.ctguk.com +44 (0)20 7490 4770

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5/12/08 10:57:32 AM

TOOLKITS
Comparable transaction analysis completion toolkit Universe identication: Make sure the transactions are controlling stakes Minority purchases can enable controlling stake Review pre-existing deal sheets and models do not reinvent the wheel Exclude IPOs, share repurchases, block trades and failed transactions Know your sector and transaction history Be wary of using old transactions in the universe (2 to 5 years max) Choose a meaningful period avoid valuation bubbles Sanity check the inclusion of key competitors in the universe they should have completed transactions Quality transactions better than quantity transactions Sourcing deal data: Use databases with caution go back to source documents for numbers and detail Normal sources: Company website Annual reports / 10K Review 8K or disclosure documents if the transaction is material Review offer documents Research Factiva SDC Thomson Deals M&A monitor DealLogic Bloomberg Ensure metrics are consistently applied historic vs LTM vs forecast Sense check multiples: PE multiple > EBIT multiple > EBITDA multiple > Revenue multiple Outliers identify and explain Always have latest version of the model with you just in case Know your sources Footnote all adjustments to raw numbers Keep back-up copies of referenced base documents Think do not just process Check, check and check again Stand back and look at the big picture

The Corporate Training Group www.ctguk.com +44 (0)20 7490 4770

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5/12/08 10:57:33 AM

TOOLKITS
DCF completion toolkit Make sure the data tables have been updated press F9 Always clarify the valuation date Express valuation in terms of implied multiples and benchmark Visible period drivers: Step back and sense check assumptions Do the sales growth rate assumptions, working capital and capex assumptions work consistently with the business model? Do the growth rate and margin assumptions t with the market and competitive advantage of the company? Benchmark key drivers against research and comparables Check continuity of numbers from historic, current to forecast watch for peaks and troughs Are the visible period assumptions mature by the terminal period? Are the constant annual growth rates (CAGR) of each cash ow line sensible? WACC calculation: Stand back from the WACC does it make sense with respect to the risk prole of the business? Know your WACC sources and parameters benchmark versus comparables and research Terminal value: Check the EV split between the present value of the terminal value and the visible period Justify your perpetuity growth rate assumptions what is the implied exit multiple Back-out growth rates if multiples are used How do exit multiples compare relative to comps (trading vs transaction)? Know your sources Footnote all adjustments to raw numbers Keep back-up copies of referenced base documents Check, check and check again Think do not just process Stand back and look at the big picture

The Corporate Training Group www.ctguk.com +44 (0)20 7490 4770

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5/12/08 10:57:33 AM