The so-called venture capital valuation method (more on that here) requires the ability to estimate cashflows over a period of several years and to determine what the exit value is going to be. Making reliable forecasts if there is no historic performance to base your future projections on and, as often is the case with new technology startups, when there are hardly any comparable companies available to use as a proxy may be tricky. The Dave Berkus method, a much less mathematically rigorous approach, offers a possible alternative. Read more...


Some call it the funhouse Hall of Mirrors in the world of financial reporting. Charlie Munger from Berkshire Hathaway goes even further by calling it the “bullshit earnings”. Technically “EBITDA” is an abbreviation that stands for earnings before interest, taxation, depreciation and amortisation. The beginnings of its widespread application date back to 1980s and to the wave of leveraged buyouts in the US when EBITDA offered a quick way to estimate a company’s ability to take on and service debt. Read more...


We are used to believing that old clichés are something that one should rather avoid. Alas, in the case of valuation the old saying that “despite the fact that it deals with numbers, valuation of companies is more art than science” is surprisingly accurate even in the best of times.

The common approach suggests building a spreadsheet with as detailed future financial performance projections as possible, to isolate the estimated free cash flows and then to discount them back to their present value using a discount rate that reflects the riskiness of those cash flows. The results from discounted cash flow analysis usually are crosschecked and validated using the comparative companies and comparative transactions data. This works fairly well for any established and mature businesses, but how to value an investment at a very early stage of company life cycle? Read more...


Starting from 1980s many businesses who had flourished through centuries in the form of partnerships have gradually disappeared. The competitive pressures have been too strong and the temptation to cash in through a listing on a stock market has proven to be hard to resist. As a result, there are hardly any merchant and investment banking partnerships left today. It is only the legal profession that so far has shown remarkable resilience against the trend. Now this might be changing. Read more...


Last year the headlines of the M&A market were dominated by three transactions north of EUR 100 million, involving the exit of three of the largest investors – Gazprom, E.ON Ruhrgas International GmbH (both from Lietuvos Dujos and Amber Grid) and RSA Group (from Lietuvos Draudimas). Read more...

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