Investment Due Diligence Template
Scott Lane (CFO and CRO, TPG Credit Management)
| Jun 5, 2009Template for use when making major investments, particularly those involving asset management partners. Includes considerations for credit, market, and operational risks.
Comments
Company:
This is very thorough and helpful. Too many companies rush to M&A as some sort of panacea and run straight through any sort of organized, thoughtful analysis.
Would be great if you had some corporate valuation models to compliment this process... :)
Company:
There may be many ways to value a company. However, I personally don't take those very seriously if they use multiples. I tend to think that those people might not know how to do a real cash flow valuation. I wouldn't want someone spending my money based on a multiple, and I doubt that you would if you were buying either. We are just coming out of a period of a serious under appreciation of risk, due largely to devices such as this. True, there are shortcuts in life. However, valuations shouldn't be one (IMHO).
Company: TPG Credit Management
You are looking for specific valuation models / templates in Excel I assume? Frankly most of what I have seen has been pretty basic: high level cash flow forecast with the IRR being the output given the purchase price.
I have usually seen three scenarios: base case, upside, and downside. Of course the forecast is built on a bottom up analysis but that is usually specific to each company. It is also highly judgmental.
Company:
There are many ways to model as you note. I have seen line-by-line bottoms up cash flow models and have also seen very high-level multiples-based models. I'd like to see all of them. One of my desires for Proformative is to see people hang up every variety of model so that when I need something in particular, I can find it here and save myself untold hours of recreating the wheel.
Reminds me, I need to dig up and post some of my own ;).
Company: TPG Credit Management
True, many ways to skin the valuation cat. My examples are not company valuations per se, rather they are various securities or assets within the capital structure. However, as you know, it is the same process just different cash flows to run the model.
I have a number of examples, will need some time to sanitize to allow for posting. Give me a few days....