Valuation

Idov vs. Excel. Idov: 0; Excel: 1.

Per our earlier post, private equity anonyblogger Equity Private re-values GE based on Michael Idov’s assumptions about how Daily Candy gets to a $100 million valuation**:

General Electric trailing twelve months of revenue: $144.4 billion.
GE market cap (April 24, 2006): $358.8 billion.
Control premium for acquisition of GE (2005 average): 30%
Optimism factor applied to control premium: 20%
Resulting control premium: 36%
Theoretical acquisition cost of GE with control premium: $487.9 billion.
Cost of restructuring GE to an “internet focused firm”: 15% of enterprise value.
Restructuring time frame: 1 year.
Dollar cost of restructuring: $53.8 billion.
Total cost of GE acquisition and restructuring: $541.72 billion.
Potential sale price via “Idov Valuation Methodology” (patent pending): $1,444 trillion.
Gains from sale: $902.3 billion.
Time period: 1 year.
IRR on transaction: 66.56%
Cash on Cash: 1.67x

Our net worth went up just reading that.
**Idov asserts that “most companies” sell for 10x revenue. Incidentally, if that were the case, it would mean that New York mag was sold to Bruce Wasserstein at roughly 56%*** of market value.
***Then again, the more we think about the Lazard IPO, Wasserstein getting away with paying 56% of market for anything else would be par for the course.
Subjectively Objective [Going Private]

  • 24 Apr 2006 at 8:29 AM
  • Valuation

Silicon Alley 2.0

dcandy.gifThe New York Times and New York mag both lead the week with return-of-the-dot-com boom stories about MySpace and DailyCandy, respectively. Conclusion: it’s different this time. Sort of. Kurt Andersen, in a separate column, interviews former Flatiron Partner Fred Wilson, who explains how:

“It doesn’t seem like really dumb things are getting funded,” Fred says. “You’re largely not seeing Webvans and Kozmos and Urban Box Offices.”

Notes Andersen: “The latter two really dumb companies were financed by Flatiron.”
New York mag also examines the much-buzzed-about (inasmuch as an 8-to-9-figure deal that doesn’t involve a bulge-bracket investment bank or Carl Icahn can be “much-buzzed about”) sale of Daily Candy. Reporter Michael Idov makes the completely inexplicable assertion that it’s “impossible” to determine the value of Daily Candy:

It’s nearly impossible to apply the usual valuation formulas to DailyCandy. According to the Wall Street Journal, the company projects revenue of “somewhere less than $20 million” this year. Most successful businesses go on sale valued at least ten times their yearly revenue, so by this standard, DailyCandy should cost $200 million or more.

We’re mailing him a copy of Damodaran on Valuation, but in the meantime, we’ll stick our finger in the air, just like everyone else: $48 million.**
**That said, we hope it’s closer to $100 million, for our own selfish reasons.