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#Fincabulary 22 – Takeout Value

MeaningThe estimated value of a company if it were to be taken private or acquired.

A firm’s takeout value considers various metrics, such as cash flows, assets, earnings and multiples used in similar takeovers. The mergers and acquisitions environment can also affect the takeout value of a company. There is no exact formula for takeout valuation, since a variety of metrics, such as EBIDTA multiple, P/E ratio and even firm-specific information can be taken into account. The value is used by both financial analysts and shareholders. The analysts will use the valuation to determine a range of possible price levels for takeover bids, while shareholders can estimate how much return they might receive if their shares are acquired.

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