Comparables Analysis and
Precedents Transactions
November 3, 2012
In partnership with the
Joshua Jia
Jules Koifman
Alexander Banh
| Instructor / CEO
| Instructor
| CSO
Recruiting
1
Finance Interview Preparation Workshops
•
“Preparing for finance recruiting isn’t just skimming The Vault anymore. Students
should study for recruiting like a course and do their homework, because the final
exam is the interview.” – VP, recruiter for Queen’s
•
Like a course, there should be:
 “Homework:” regular readings are necessary
 Practice (mock interviews)
 Comprehensive, accessible resources for all interested students
•
The most important “exam” of any Commerce student’s life
Introduction
Enterprise
Comparables
Precedents
Limestone Capital Offering
2
Finance Interview Preparation Workshops
6 Sessions: Saturdays at 4 p.m., Thursdays at 7 p.m.: November 3 – November 22
1.
2.
3.
4.
5.
6.
Comparables Analysis and Precedent Transactions
Discounted Cash Flows and Accounting
Mergers & Acquisitions (M&A)
Leveraged Buyouts (LBO)
Market Questions
Fit / Deals / Networking
Rationale
•
•
•
Candidates differentiate themselves by knowing hard M&A and LBO questions
Queen’s needs to offer comprehensive resources to continue being competitive
Further Queen’s Commerce’s reputation as a career-minded institution
Introduction
Enterprise
Comparables
Precedents
The Process
3
Information Sessions
•
•
•
•
•
Second week of November
Look professional
Meet people, get business cards or remember names, follow up
Don’t ask fluffy, general questions just for the sake of asking them
 If you ask generic questions, you will get generic answers
Ask about the business, deals, what they like about working at X firm
Interviews
•
•
First rounds: third or fourth week of November
 80% technical
Final rounds: fourth week of November or first week of December
 Mostly fit
 The dinner
 Be ready for exploding offers
Introduction
Enterprise
Comparables
Precedents
Jobs in Capital Markets
4
Capital Markets
Investment Banking
Industry Groups:
• Metals & Mining (BMO)
• Financials
• TMT (CIBC)
• Real Estate (TD,
Brookfield)
• Healthcare
• Consumer
• Infrastructure
• Diversified
• Oil & Gas (Calgary)
Equity Research
Groups:
• Equity
• Fixed Income
• Economic
• Quantitative
• Sovereign
Sales & Trading
Groups:
• Equity
• Fixed Income
• Derivatives
• Currencies
• Automated Trading
• Asset-Backed
Securities
Product Groups
• M&A
• Equity Capital Markets
• Debt Capital Markets
• Syndication
• Restructuring
Introduction
Enterprise
Comparables
Precedents
Enterprise Value
5
How is Enterprise Value calculated?
•
Two ways to think about Enterprise Value (EV)
 Value of the firm: both debt and equity
 Theoretical takeover price (no control premium)
•
Enterprise Value = Market Cap. + Preferred Equity + Minority Interest + Debt - Cash
Why do we use Enterprise Value?
•
Market cap. only measures the equity value
 Ignores debt and preferred shares
•
Enterprise value represents the value of the firm to both debt and equity holders
 The market value of all capital invested in the business
•
Multiples using EV are more comparable
Introduction
Enterprise
Comparables
Precedents
Enterprise Value
6
Why do we subtract cash?
•
Imagine buying a company that consisted of the following:
 Piggy bank with $99 inside
 The “piggy” is worth $1
•
EV represents the theoretical takeover price
 Let the owner keep the $99, pay $1 for the piggy
 Buying cash with cash is redundant, so we net it out
Paying off debt with cash
•
If a company only has $10 of debt and $10 of cash on its balance sheet, it has an
Enterprise Value of zero
 You can pay off the $10 of debt with $10 of cash; this company is worthless
 Debt - Cash = Net Debt
Introduction
Enterprise
Comparables
Precedents
Enterprise Value
7
Why do we add preferred equity?
•
In accounting, equity refers to both common and preferred equity
•
In finance, equity value (market cap.) only consists of common shares
•
Preferred equity is treated more like debt
 Price doesn’t move much, dividends are like interest
Introduction
Enterprise
Comparables
Precedents
Multiples
8
What are multiples?
•
When we buy stock, we are paying to “own” a piece of a company’s cash flows
 Although we don’t receive the cash, market price should adjust to reflect changes
in expectations of these projected cash flows
•
Multiples: how much the market is valuing a company relative to the value
stakeholders are receiving, e.g. how much cash that company is generating
How long before I get my money back?
•
Assume price to earnings ratio of 5
 Paying $5 for $1 of earnings
 5 years before those earnings add up to original price paid
Introduction
Enterprise
Comparables
Precedents
Common Multiples
9
Equity Multiples
•
•
Enterprise Multiples
•
Price / Earnings: how much are
Enterprise Value (EV) / EBITDA: how
shareholders paying for $1 of earnings?
much are stakeholders (both
Price / Book: how much are
bondholders and shareholders) paying
shareholders paying for $1 of equity
for $1 of EBITDA generation?
book value?
 Book represents book value of
•
EV / EBIT
•
EV / Revenue
equity per share
•
Price / Tangible Book Value
 Tangible Book Value does not
include intangible assets like
patents and Goodwill
•
Price / Cash Flow
 Operating cash flow per share
Introduction
Enterprise
Comparables
Precedents
Forward Multiples
10
Valuing future growth vs. historical growth
•
Historical last twelve months (LTM) vs. projected next twelve months (NTM)
•
Historical multiples include EV / LTM EBITDA, EV / LTM Revenue, and Price / LTM EPS
•
Forward multiples include EV / NTM EBITDA, EV / NTM Revenue and Price / NTM EPS
•
Price / Earnings-to-Growth
 Known as PEG
Price / Earnings Ratio
Annual EPS Growth
•
Most people prefer forward multiples because it accounts for projected growth
•
LTM results may be a poor proxy for projected growth because of:
 One-time charges
 Tax (NOLs)
 Past ≠ Future  circumstances have changed
Introduction
Enterprise
Comparables
Precedents
Apples-to-Apples
11
Multiples must be consistent
•
Numerator / Denominator must be the same “unit”
 Dividing kilometers by miles is not meaningful
 Apples-to-Apples vs. Apples-to-Oranges
•
Equity value metrics and enterprise value metrics are different
 Value to shareholders vs. value to ALL stakeholders (shareholders, bondholders,
preferred shareholders)
Introduction
Enterprise
Comparables
Precedents
Apples-to-Apples
12
Multiples must be consistent
•
Price / Revenue is not meaningful
 Price represents the market value of equityholder’s holdings
 Revenue goes to ALL stakeholders
•
EV / Earnings is not meaningful
 Enterprise value represents the value of the entire firm
 Earnings represents value to shareholders since interest has been deducted
Introduction
Enterprise
Comparables
Precedents
EV / EBITDA vs. P / E
13
Why is EV / EBITDA generally better than P / E?
•
P / E is an equity metric, while EV / EBITDA is an enterprise metric
 P / E only looks at equity portion, ignores debt / preferred shareholders
•
P / E is not capital structure neutral
 P / E is highly dependent on leverage
 More debt  more risk to shareholders  shareholders demand lower P / E
 Even if debt is cheaper than equity, the P / E metric will penalize companies who
choose to finance through debt
 Using P / E to value companies violates M&M theory
•
EV / EBITDA is capital structure neutral
 The mix of equity and debt does not change EV assuming similar cost of capital
 Doesn’t matter how you “slice the pie”, total EV is the same
Introduction
Enterprise
Comparables
Precedents
Earnings vs. EBITDA
14
What are some issues with using earnings?
•
Earnings are subject to manipulation, one-time charges, differing accounting policies,
non-cash expenses, and ambiguity
 e.g. Enron
Why do we like EBITDA?
•
EBITDA is more similar to cash flow and is capital structure neutral
 Less room for manipulation
 Ignores D&A, a non-cash expense
 Ignores interest expense; EBITDA is available to shareholders, bondholders, and
preferred shareholders
•
EBITDA is a proxy for cash flow available to all stakeholders
Introduction
Enterprise
Comparables
Precedents
Advantages of P / E
15
When is P / E better than EV / EBITDA?
•
If interest is a part of a company’s cost of doing business
 Banks, financial institutions
 Financial
•
If companies in the industry have negligible amounts of debt
 Tech companies
 Junior mining companies
 Volatile businesses (e.g. startups)
•
If you are valuing a minority investment
 Equity investments with <50% ownership
 No control over enterprise, therefore enterprise multiples are inappropriate
•
P / E is easier to calculate than EV / EBITDA
Introduction
Enterprise
Comparables
Precedents
Minority Interest
16
What is minority interest?
•
Also known as “non-controlling interest”
•
If we own more than 50% of a subsidiary, we consolidate our financial statements with
the subsidiary’s
•
Even if we own only 51% of Company S, 100% of Company S’s income statement line
items are added to our income statement line items
•
However, only 51% of Company S’s balance sheet line items are added to our
balance sheet items
 49% of Company S’s net assets (assets – liabilities) go into “minority interest”
•
Minority interest is the part of a subsidiary that we don’t own
 Found in equity section of balance sheet (IFRS)
Introduction
Enterprise
Comparables
Precedents
Minority Interest
17
How do we consolidate the parent and subsidiary?
Parent Corp.
Subsidiary Corp.
-Income Statement
-Income Statement
-Balance Sheet
-Balance Sheet
•
•
•
•
Consolidated Entity
(Reported by Parent Corporation)
Combined Balance Sheet, line-by-line
Combined Income Statement, line-by-line
Eliminate things like
• inter-company gains and losses
• inter-company balances (Assets/Liabilities)
• Parent’s investment in the subsidiary company
Minority interest reported (the percent of the subsidiary not owned by the
parent) on both statements
Introduction
Enterprise
Comparables
Precedents
Minority Interest
18
Why do we add minority interest to get Enterprise Value?
•
EV = Market Cap + Preferred Equity + Debt – Cash + Minority Interest
•
In enterprise multiples, EV is the numerator, and an income statement line item is
often the denominator
•
Denominator: Income statement line items are consolidated and include 100% of the
subsidiary’s (Company S) income statement line items
•
Numerator: Market Cap + Preferred Equity + Debt accounts for 51% of Company S
 The 49% we don’t own is not factored into the prices of the parent’s stock,
bonds, or preferred shares
 To make the numerator consistent with the denominator, we add in the 49% of
Company S we don’t own (minority interest)
•
To make multiples like EV / EBITDA, EV / EBIT and EV / Revenue an “apples-toapples” comparison, we add minority interest
Introduction
Enterprise
Comparables
Precedents
Minority Interest
19
EV / EBITDA  Apples-to-Apples
Add the portion of the subsidiary we don’t own so numerator and denominator are consistent
Market Capitalization + Minority Interest + Preferred Equity + Debt – Cash
subsidiary consolidated by
adding minority interest
Enterprise Value
subsidiary consolidated
from accounting rules
EBITDA
Introduction
Enterprise
Comparables
Precedents
Equity Method
20
What if we only own 20 to 50% of a company?
•
Use the Equity Method
•
If we bought 20% of Company E, we get 20% of Company E’s net income
 Ignore Company E’s stock price
•
Company E is worth $100, we pay $20
 Balance sheet item  Investment in Company E: $20
•
If Company E reports $10 of net income, we get 20% of that  $2
 Investment in Company goes up by $2 (Debit)
 Investment income goes up by $2 (Credit)
Introduction
Enterprise
Comparables
Precedents
Investments
21
Short Term Investments
•
Short-term investments with less than 20% control
 Also known as investments held for trading
•
Mark-to-market
•
Unrealized gains or losses flow straight to Net Income
Long Term Investments
•
Long-term investments with less than 20% control
 Also known as investments available for sale
•
Unrealized gains or losses flow through Other Comprehensive Income (OCI)
 Only flows through net income after investment is sold
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
22
What is comparable companies analysis?
•
Looking at similar companies and seeing how they are valued on a multiples basis
 Common multiples include EV / EBITDA, EV / Revenue, P / B
•
Taking the average (median) multiple
 e.g. 6.0x EV / EBITDA
•
Apply to target company’s metric to get implied valuation
 Target company’s EBITDA is $5 mm
 6.0 x $5 mm = $30 mm  implied enterprise value
Valuing a house
•
Similar to valuing a house
•
Look at how much surrounding houses are worth relative to square feet (or other metric)
•
Find median price-to-square feet multiple
•
Apply this multiple to number of square feet in target house to get implied valuation
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
23
Issues?
•
Are mansions comparable to normal houses?
 Size must be comparable
•
What other features might affect how much houses are worth?
 Number of garage doors?
 Number of bedrooms? Bathrooms?
 Furnished?
•
Should price-to-square-feet be the only multiple?
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
24
Pros
•
Market-based valuation
 DCFs often do not reflect short-term market conditions
 Reflects market trends: poor market  lower multiples  lower implied value
•
Useful when a DCF is impossible or hard to do
 IPO
 Private companies with limited information
 Minority investments
•
Shortcut to a DCF
 Assume comparables are valued efficiently by the market in a DCF fashion
 If every house around you has been appraised, do you really need an appraisal?
•
Less room for manipulation compared to DCF
 Provides a benchmark value based on similar companies
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
25
Cons
•
Does not account for synergies or control premiums in M&A analysis
•
Doesn’t explain market inefficiencies
 If market is irrational, then valuation may be irrational
•
Difficult to find comparable companies
 e.g. Facebook
•
May not accurately reflect intrinsic value in small-cap, thinly traded stocks
•
Disconnect from company’s projected cash flows
•
Ignores company specific issues
Introduction
Enterprise
Comparables
Precedents
26
Comparable Companies Analysis
Using the Quick Comps Capital IQ feature
1. Select company in Capital IQ search bar
2. Select “Quick Comps”
Introduction
Background
Enterprise
Situation
Comparables
Solution
Precedents
Implementation
Comparable Companies Analysis
27
Using the Quick Comps Capital IQ feature
1. Scrutinize automatically generated list of comparables
2. Add and delete companies
Export to
Excel
Add
Delete
Introduction
Enterprise
Comparables
Precedents
28
Comparable Companies Analysis
Using Bloomberg to build comps
1. Select company
2. Type in: RV (stands for relative valuation)
3. Add and delete companies to the list
4. Go to “Edit Comparables” if you want to add different columns (e.g. P / NAV)
5. Export to Excel
6. If file is saved on the same computer, file will automatically update
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
29
Complete Process
1. Select the universe of comparable companies
 Competitors, look at research reports
 Pull research reports from Bloomberg / Capital IQ
2. Locate the necessary financial information
 Canada: Pull annual / quarterly reports from SEDAR, pull investor presentations
 United States: Pull 10Ks / 8Ks from EDGAR
 Research reports / Factset / Bloomberg for forward estimates
3. Spread key statistics, ratios, and trading multiples
 Measure profitability, growth, returns and credit strength
4. Benchmark the comparable companies
 Scrutinize list of companies, delete ones that are not comparable
5. Determine valuation
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
30
Selecting your universe of comparables
•
Make sure companies have similar traits in the following areas
Operational
•
•
•
•
•
•
•
Financial
•
•
•
•
•
Industry
Products
Business  is this a pure play?
Location  different tax codes
Cyclicality
Customers
Distribution channels
Introduction
Enterprise
Comparables
Size
Leverage
Projected growth
Risk profile
Shareholder base
Precedents
Comparable Companies Analysis
31
Valuation
Ticker
Current
Share
Price
% of
52-wk.
High
BBY:NYSE
$ 18.24
64%
$
RSH:NYSE
GME:NYSE
TGT:NYSE
WMT:NYSE
$ 2.79
$ 23.15
$ 64.67
$ 74.50
20%
87%
74%
99%
2013E
Sales
6,723
0.1x
0.1x
2.6x
$
288 $
450
$ 2,673 $ 2,535
$ 42,351 $ 58,673
$ 251,537 $ 254,048
0.1x
0.3x
0.8x
0.6x
0.1x
0.3x
0.8x
0.9x
Mean
Median
0.4x
0.4x
High
Low
0.8x
0.1x
Best Buy Co. Inc
6,238
Enterprise
Value
Enterprise Value /
LTM
2013E
EBITDA EBITDA
LTM
Sales
Company
Equity
Value
$
LTM
EBIT
2013E
EBIT
2.6x
3.1x
3.9x
4.6x
3.4x
7.9x
7.3x
3.7x
3.3x
7.7x
6.7x
20.7x
4.4x
11.0x
9.6x
16.5x
4.3x
10.9x
8.7x
0.5x
0.5x
5.8x
6.0x
5.3x
5.2x
11.4x
10.3x
10.1x
9.8x
0.9x
0.1x
7.9x
3.4x
7.7x
3.3x
20.7x
4.4x
16.5x
4.3x
Comparables
Radioshack
Gamestop
Target
Wal-Mart Stores
•
•
•
•
How can we find implied value?
Take median multiple (e.g. EV / LTM Sales, EV / ‘13E EBITDA)
Multiply with BestBuy’s corresponding metric (e.g. LTM Sales, ’13E EBITDA)
Valuation typically presented in a range
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
32
Issues?
Ticker
Current
Share
Price
% of
52-wk.
High
BBY:NYSE
$ 18.24
64%
$
RSH:NYSE
GME:NYSE
TGT:NYSE
WMT:NYSE
$ 2.79
$ 23.15
$ 64.67
$ 74.50
20%
87%
74%
99%
2013E
Sales
6,723
0.1x
0.1x
2.6x
$
288 $
450
$ 2,673 $ 2,535
$ 42,351 $ 58,673
$ 251,537 $ 254,048
0.1x
0.3x
0.8x
0.6x
0.1x
0.3x
0.8x
0.9x
Mean
Median
0.4x
0.4x
High
Low
0.8x
0.1x
Best Buy Co. Inc
6,238
Enterprise
Value
Enterprise Value /
LTM
2013E
EBITDA EBITDA
LTM
Sales
Company
Equity
Value
$
LTM
EBIT
2013E
EBIT
2.6x
3.1x
3.9x
4.6x
3.4x
7.9x
7.3x
3.7x
3.3x
7.7x
6.7x
20.7x
4.4x
11.0x
9.6x
16.5x
4.3x
10.9x
8.7x
0.5x
0.5x
5.8x
6.0x
5.3x
5.2x
11.4x
10.3x
10.1x
9.8x
0.9x
0.1x
7.9x
3.4x
7.7x
3.3x
20.7x
4.4x
16.5x
4.3x
Comparables
Radioshack
Gamestop
Target
Wal-Mart Stores
•
•
Are these companies really comparable with BestBuy?
Sometimes it is difficult to find truly comparable companies
Introduction
Enterprise
Comparables
Precedents
Comparable Companies Analysis
33
Establishing Multiple Range
Note: this example is unrelated to the BestBuy example
Closest
Comparable A
4.0x
Low
Closest
Comparable A
5.0x
Closest
Comparable C
6.0x
6.5x
Median
High
Mean
Selected Multiple Range
Introduction
Enterprise
Comparables
7.0x
Precedents
Comparables Valuation
34
EV / EBITDA Valuation
•
Establish EV / EBITDA range from comparables
 Decide range by analyzing closest comparables, median, mean, high and low
 Build range for LTM, 2012E, and 2013E
•
Multiply to company’s EBITDA (LTM, 2012E and 2013E)
•
Arrive at Implied Enterprise Value range
•
Less: Net Debt (Debt – Cash)
 Assume no minority interest or preferred equity in this case
•
Arrive at Implied Equity Value
•
Divide by Fully Diluted Shares Outstanding
EBITDA
LTM
2012E
2013E
Introduction
Less:
Financial
Implied
Net
Metric Multiple Range Enterprise Value Debt
50
55
80
10.0x - 13.0x
9.0x - 12.0x
8.0x - 11.0x
Enterprise
$500 - $650
495 660
640 880
Implied
Equity Value
($100) $400 ($100)
395 ($100)
540 -
Comparables
$550
560
780
Precedents
Fully
Diluted
Shares
Implied
Share Price
100
100
100
$4.00 - $5.50
3.95 - 5.60
5.40 - 7.80
Precedents Transactions
35
Similar to comps, but focused on transactions
•
Comparable transaction analysis
 Looks at historical transactions
•
Similar multiples, but EV is based on EV paid as opposed to market-implied EV
 EV Paid / EBITDA, EV Paid / Revenue
•
Valuation derived from precedents will typically be higher than comparables and DCF
because of control premium
•
Control premium:
 Synergies
 Ability to control timing of cash flows
 Ability to change management, improve business
•
Precedents are similar to valuing your house based on how much surrounding houses
were bought for on a price-to-square-feet basis
Introduction
Enterprise
Comparables
Precedents
Precedents Transactions
36
Precedents Example
Enterprise Value /
Date
Announced
Acquirer Target
03/11/2010
30/10/2010
22/06/2010
15/04/2010
01/10/2009
A
B
C
D
E
K
L
M
N
O
01/07/2009
06/07/2008
F
G
P
Q
09/11/2008
H
R
21/06/2008
I
S
20/03/2007
J
T
Transaction
Type
EBITDA
Margin
Equity Value /
Premiums Paid
LTM
Days Prior to Unaffected
Net Income
1
7
30
Cash
Cash / Stock
Cash
Stock
Cash
$1,600
900
600
1,300
200
$1,900
1,200
800
1,350
250
1.5x
1.2x
1.1x
1.6x
1.3x
8.0x
7.6x
7.1x
8.5x
7.7x
9.1x
8.7x
8.1x
12.5x
9.2x
18%
16%
15%
19%
17%
13.6x
13.9x
12.0x
14.4x
13.3x
30%
29%
NA
29%
NA
27%
32%
NA
36%
NA
33%
31%
NA
34%
NA
Stock
Cash
2,800
1,600
3,000
2,000
1.4x
1.2x
8.0x
7.5x
10.7x
9.3x
18%
15%
17.7x
12.4x
33%
38%
31%
42%
36%
43%
Cash
900
950
1.2x
7.3x
8.3x
16%
13.1x
34%
35%
36%
Cash
1,300
1,800
1.0x
7.2x
8.3x
13%
16.0x
35%
37%
39%
Cash
370
600
0.9x
6.5x
8.1x
14%
10.6x
NA
NA
NA
Mean
Median
1.2x
1.2x
7.5x
7.5x
9.2x
8.9x
16%
16%
13.7x
13.4x
33%
33%
34%
35%
36%
36%
High
Low
1.6x
0.9x
8.5x
6.5x
12.5x
8.1x
19%
13%
17.7x
10.6x
38%
29%
42%
27%
43%
31%
Introduction
Public / Public
Public / Public
Public / Private
Public / Public
Sponsor /
Private
Public / Public
Sponsor /
Public
Sponsor /
Public
Sponsor /
Public
Public / Private
Purchase
Equity Enterprise LTM
LTM
LTM
Consideration Value
Value
Sales EBITDA EBIT
LTM
Enterprise
Comparables
Precedents
Precedents Transactions
37
Pros
•
Market-based
 Based on actual acquisition multiples paid for comparable companies
 Recent transactions reflect current market trends, economic conditions, etc.
•
Simple to use
 Recent, key transactions provide a benchmark acquisition multiples
•
Objective
 Based on actual acquisitions, does not make assumptions about the future
Introduction
Enterprise
Comparables
Precedents
Precedents Transactions
38
Cons
•
Time lag
 Markets could be very different during the time the acquisition took place
•
Lack of comparable acquisitions
 May be difficult to find recent acquisitions with similar deal terms, line of business,
financial ratios, scale, context, etc.
•
Information could be hard to find
 Private and / or small transactions sometimes have very little data
•
Each acquisition is unique
 Different deal terms
 Different motivations, plans to turn around business
 Different synergies to be realized
Introduction
Enterprise
Comparables
Precedents
More Multiples
39
Resource
•
P / NAV: used in mining and energy
 NAV is a DCF on each of a
Finance / Real Estate
•
P / B and P / E for banks
•
EV / AUM for asset management firms
company’s assets, using a different
discount rate for each project
•
 AUM = Assets Under Management
•
EV / Production
 FFO = Funds from Operations
 Measured in BOE / day (barrels of
oil equivalent) or Tonnes / day
(metric tons)
•
EV / Reserves
 EV / Proven Reserves (1P)
 EV / Proven + Probable (2P)
 1P  90%, 2P  50%, 3P  10%
EV / FFO for REITs
 Net Income + D&A
•
EV / AFFO
 AFFO = Adjusted Funds from Ops
 FFO + Rent Increases + Certain
CAPEX Items
More Multiples
40
Tech
Retail
•
EV / Registered Users
•
EV / Square Feet of Retail
•
EV / Pageviews
•
EV / EBITDAR
•
EV / Unique Visitors
 Add back rent to EBITDA
•
EV / Subscribers
 Some retail firms choose to rent,
others choose to buy stores
 EBITDAR does not penalize retail
Airlines
•
EV / Planes
•
EV / Passengers
firms for renting