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Takeout Value

What is 'Takeout Value'

The 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 current mergers and acquisitions environment can also affect the takeout value of a company.

There is not an 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.

Explaining 'Takeout Value'

The takeout 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.

Takeout valuation uses the metrics of the target company and compares them to multiples used in similar takeover transactions. For example, a past takeover saw a firm with earnings of $5 million get acquired for $22.5 million. This implies an earnings multiple of 4.5 ($22.5 million / $5 million). A similar company with earnings of $3 million is now being considered a takeover target. The takeout value of the new company would be $13.5 million ($3 million × 4.5).


Further Reading


Shareholder Coordination Costs, Shark Repellents, and Takeout Mergers: The Case Against Fiduciary Duties
onlinelibrary.wiley.com [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …

Balancing the Rights of Majority and Minority Shareholders in Take-Out Mergers: Trends in Delaware LawBalancing the Rights of Majority and Minority Shareholders in Take-Out Mergers: Trends in Delaware Law
heinonline.org [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …

Shock-based causal inference in corporate finance and accounting researchShock-based causal inference in corporate finance and accounting research
papers.ssrn.com [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …

Testing for efficiency in lotto marketsTesting for efficiency in lotto markets
onlinelibrary.wiley.com [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …

How does law affect finance? An examination of equity tunneling in BulgariaHow does law affect finance? An examination of equity tunneling in Bulgaria
www.sciencedirect.com [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …

The relation between firm-level corporate governance and market value: A case study of IndiaThe relation between firm-level corporate governance and market value: A case study of India
www.sciencedirect.com [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …

What matters and for which firms for corporate governance in emerging markets? Evidence from Brazil (and other BRIK countries)What matters and for which firms for corporate governance in emerging markets? Evidence from Brazil (and other BRIK countries)
www.sciencedirect.com [PDF]
… I have borrowed this term from Elliot J. Weiss, The Law of Take Out Mergers: A Historical … of dividends by the controlled firm as evidence that the subsidiary's shares had declined in value … of dilemma described herein, investors may find little to com- plain about in a takeout at or …


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