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Furthermore, any quantitative valuation method, particularly the Discounted Cash Flow (DCF) approach, is highly sensitive to the underlying assumptions about growth rates, discount rates, and terminalvalues. butcher, barber) where assets are tangible and customer acquisition straightforward, it breaks down for technology startups.
Special considerations for valuing M&A deals include synergies, regulatory issues, economic conditions, tax implications, technology/IP valuation, financing structure, buyer type, and purchase price allocation. These methods provide a relative measure of a company’s value and are widely used due to their market-based nature.
Candidates should highlight their commitment to staying updated on industry trends, regulations, and emerging technologies. Prominence of Valuation Methods: Discounted Cash Flow (DCF) analysis, comparable company analysis (comps), and precedent transactions are often regarded as the three most used valuation methodologies.
23] TerminalValue Approaches: Since forecasting cash flows indefinitely is impractical, DCF methods estimate cash flows for an explicit period (e.g., 3-5 years [3] , [24] ) and then calculate a “TerminalValue” (TV) representing the value of all cash flows beyond that point.
While not a reward for the past, a startup’s current state its traction, team, technology, and milestones is critically important. [4] Product & Technology: A working prototype, a minimum viable product (MVP), or proprietary intellectual property (IP) demonstrates technical feasibility and a potential competitive advantage. [1]
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