Beyond the three – which matters most in projections – How would Acquisition hit the multiple

Out of the three volatilities, which would affect a company most? This answer can help a company control that part, example if its Share price, they can do Repo, if its margin, then they can research the past mistakes & can try to correct them, if it is Sales then a company can look into it. Although the general idea is to focus on sales and margin is a particular way to keep sales high and margin low, this might back fire and increase the volatility, so long term stability should be in the focus.

Beyond the three – which matters most in projections?

1.      CFO projection

2.      Dividend Projection

3.      Remaining cash that accrues?

4.      Dep – Capex – PPE can be ignored.

Projection of EV/EBITDA and EBITDA post acquisition, will market add the growth factor in your multiple?

Repo vs. Acquisition:

• The Minimum elements needed for projection of the company we acquire?
• Post-acquisition will market change our multiple?
• Doing Repo will cut our future growth prospectus?
• Which sensitivities must we take?

Would a multiple regression help on multiple help? If the multiple is correlated with growth of sales and capex the next acquisition will reward us with better multiple, also if it is negatively correlated with growth, it will reward us (spending cash is a good idea) but if things are reverse the acquisition will not help us.

Discretionary cash at use can be used for many things which are like dividends (which should be paid), capex to keep PPE intact and other things. If we can get the NI Margin we can then get the NI and then the cash after reducing FCI and FCF and then use the cash as excess cash. The extra cash is a trouble for company in many ways and they look for options to remove that cash, but from a modeling sense reaching their required lot too many assumptions.