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Private Equity: Valuation

As we discussed in Part I and Part II of this series, private equity firms value a number of quantitative and qualitative factors when purchasing a business. In Part III, we will discuss the valuation side of the equation. Because most private equity firms are seeking out quality firms with potential to scale, quantitatively PE firms will desire companies with the following qualities:

  • Predictable and sustainable revenue
  • Predictable cash flows, and
  • Potential for multiple arbitrage.