You are seeking to value Freshwater Squid Fisheries (“FSF”), a private company w

Question

You are seeking to value Freshwater Squid Fisheries (“FSF”), a private company with sales of $200M, EBITDA of $25M and EBIT of $20M. There are three public comparable companies but two are quite large and not a close fit, while one is smaller and less profitable. Luckily, you are able to identify three transactions in recent years in a similar size range.

Assume Shrimp Cocktail Seafood Distributing is the best comparison. Assuming the EV/Sales ratio of 0.6X revenue is appropriate, what is the inferred enterprise value for FSF?

1)

$150 million

2)

$120 million

3)

$300 million

4)

$175 million

What if we use EV/EBITDA?

1)

$120 million

2)

$145 million

3)

$175 million

Assume FSF has an enterprise value of $150 million, debt of $50 million and 10 million shares. What is the value of equity per share?

1)

$10.00

2)

$15.00

3)

$12.00

4)

Cannot be determined

1)

$150 million

2)

$120 million

3)

$300 million

4)

$175 million

Explanation / Answer

Sales = 200
EV/ Sales ratio =0.6
EV = 0.6 * sales = 0.6 * 200 = 120

EBIDTA = 25
EV/ EBIDTA RATIO =
EV = EBIDTA * Ratio
(ratio not given )


Equity / share = (Total Value - Total debt)/ no of shares = (150 - 50)/10 = $10 /share

Best of Luck. God Bless

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