Purpose
Produce a triangulated enterprise and equity value range for a target company by running DCF, comparable-company, and precedent-transaction analyses side by side, then reconciling them into a defensible range with sensitivities on the assumptions that move the number most. Replaces the one-methodology gut-check with a board-ready valuation view.
When to Use
Invoke this skill when the user asks to:
- Value an acquisition target or determine a bid range before an LOI
- Price a divestiture, carve-out, or minority stake
- Build or sanity-check a valuation for a board or investment committee memo
- Triangulate a DCF against trading and transaction comps
- Stress-test how sensitive a deal price is to growth, margin, or discount-rate assumptions
- Establish a walk-away price and a target price before negotiation
Inputs Required
Before starting, collect:
- Revenue: Current-year (LTM or forecast) revenue, plus historical if available
- EBITDA: Current EBITDA and margin; note if adjusted/normalized
- Growth rate: Near-term revenue growth (next 3–5 years) and long-term/terminal growth expectation
- Sector: Industry and sub-sector, for comp and multiple selection
- Capital structure basics: Net debt (or cash), and if known, WACC / cost of equity; else specify tax rate and beta assumption
- Comparable set (if available): Named public comps or recent M&A transactions in the sector
- Purpose and horizon: Acquisition, divestiture, or refinancing; strategic vs. financial buyer
If WACC, comps, or terminal growth are not provided, use sector-standard defaults and state each assumption explicitly next to the number it drives.
Instructions
Step 1: Normalize the Financial Base
Establish clean starting figures before any methodology runs.
- Confirm whether EBITDA is reported or adjusted; flag one-time items, owner add-backs, or pro-forma synergies and separate them
- State LTM revenue, LTM EBITDA, and EBITDA margin
- Calculate net debt = total debt − cash & equivalents (used to bridge enterprise value to equity value)
- Note any working-capital or capex intensity signals that affect free cash flow
Step 2: DCF Valuation
Build an intrinsic value using discounted free cash flow.
- Project unlevered free cash flow for 5 years: revenue → EBITDA (using stated growth and margin path) → less taxes, capex, and change in working capital
- Apply a discount rate (WACC): use provided figure, or build one from a sector-typical range (state the range used, e.g., 9–12%)
- Terminal value: use Gordon Growth (FCF × (1+g) / (WACC − g)) with terminal growth of 2–3% unless sector justifies otherwise; cross-check against an exit-multiple terminal value
- Discount all cash flows and terminal value to present; sum to enterprise value
- Show a low/base/high case driven by discount rate and terminal growth
Step 3: EV/EBITDA Comparable-Company Analysis
Value against how the public market prices similar businesses.
- Select or reference the comp set; state the EV/EBITDA multiple range (low, median, high)
- If no comps are provided, apply a sector-standard forward EV/EBITDA range and name the sector benchmark used
- Apply the multiple range to the target's EBITDA to derive an EV range
- Adjust for size, growth, and margin differential vs. the comp set (a faster-growing, higher-margin target warrants the upper end; discount for illiquidity/private-company status where relevant, typically 10–25%)
Step 4: Precedent-Transaction Analysis
Value against what acquirers have actually paid.
- Reference recent M&A deals in the sector; state the transaction EV/EBITDA (or EV/Revenue if EBITDA is thin/negative) multiple range
- Note that precedent multiples typically embed a control premium and often run above trading comps — flag this
- Apply the transaction multiple range to derive an EV range
- Distinguish strategic-buyer multiples (synergy-inclusive, higher) from financial-buyer multiples where the data allows
Step 5: Triangulate and Reconcile
Bring the three methods into a single range.
- Lay out the low–high EV output from each method in one view
- Identify where the methods converge and diverge; explain divergence (e.g., DCF below comps signals either conservative growth assumptions or an overheated market)
- Weight the methods with a stated rationale (e.g., DCF-weighted for a cash-generative business with reliable forecasts; transaction-weighted for a hot sector with active dealflow)
- Bridge enterprise value to equity value using net debt
- State the recommended valuation range and a point-estimate midpoint
Step 6: Sensitivity Analysis
Show what moves the number.
- Build a sensitivity table (or structured bullets) on the two highest-impact DCF drivers — typically WACC and terminal growth — showing EV at each combination
- Flag the single assumption with the greatest swing on value
- State the implied EV/EBITDA multiple at the low, mid, and high of the final range as a reasonableness check
Output Format
- Structure: Normalized base → three methodology sections → triangulation → sensitivity
- Length: 900–1,300 words
- Format: Structured document with numbered sections; a triangulation summary table and a sensitivity table
- Sections: Financial Base → DCF → Comparable Companies → Precedent Transactions → Triangulated Range → Sensitivities → Recommended Range & Midpoint
- Tone: Corporate development analyst — precise, assumption-transparent, defensible; every number is traceable to a stated input or benchmark
Quality Checklist
Before delivering output, verify:
- [ ] All three methodologies (DCF, EV/EBITDA comps, precedent transactions) produce a stated EV range
- [ ] Every assumption (WACC, terminal growth, multiple range) is stated explicitly next to the value it drives
- [ ] Enterprise value is bridged to equity value using net debt
- [ ] The triangulation weights the three methods with a written rationale — not a blind average
- [ ] The sensitivity table shows EV across at least two drivers with the highest-impact variable flagged
- [ ] A single recommended range and midpoint is stated — no unresolved hedge
Notes
- When comps and precedent transactions are not provided, sector-standard multiple ranges are acceptable, but must be labeled as benchmarks, not observed data — the buyer needs to know what's assumed vs. sourced
- DCF below comps usually signals conservative forecasts or a frothy market; DCF above comps signals either aggressive assumptions or genuine under-pricing — call the interpretation explicitly
- Precedent-transaction multiples carry a control premium; do not apply them to a minority-stake valuation without adjustment
- Flag when EBITDA is negative or unreliable and pivot the multiple analysis to EV/Revenue rather than forcing a distorted EV/EBITDA figure
How to use this skill
This file is a Claude Code skill in Anthropic's standard format — markdown with YAML frontmatter at the top.
Installing in Claude Code:
~/.claude/skills/<folder-name>/SKILL.md— auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects)<your-project>/.claude/skills/<folder-name>/SKILL.md— auto-loads only when working in that project (recommended for project-specific skills)
Restart Claude Code or open a new session to register.
Using in Claude.ai, ChatGPT, Gemini, or other AI tools:
- Drag this file into a new chat, or copy and paste its contents
- Send your task or request as your next message — the AI will apply the skill where it fits
For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills