'Turbo' Asset Valuation Informs Bidding Strategy
Leveraged buyout firms have little time to bid on investment opportunities. Frequently, in a rush to get a deal done, funds often overbid because they underestimate the level of risk associated with a deal.
SDG assisted a buyout firm with a European transportation deal valued at nearly $1 billion. During our client's two-week exclusivity period, we provided an independent valuation of the deal as well as a recommended bid price. The team rigorously and consistently quantified each uncertainty so that we could identify key drivers of value and suggest how a deal could be structured to maximize upside and minimize downside risks.
Our client then used this proprietary information to submit a bid at the end of the two-week period. As expected from our analysis, our client did not win the bidding. Eventually, the investment was purchased by a strategic buyer who expected to reap significant synergy. Our client, though losing the bid, was satisfied that the acquisition would have been profitable at the price they bid, but would not have been as valuable had they paid the price of the eventual winning bid.