Rebuilding a Billion-Dollar Acquisition Valuation from Scratch
Challenged inflated revenue assumptions on a cross-border acquisition and rebuilt the model with conservative, data-backed projections.
Ayush Gupta
Senior Analyst at Leading Financial Services Inc
From their time as
Research and Investment Services Analyst
Leading Financial Services Inc • 2024 - 2026
Overview
Ayush was brought in as the front-end analyst on a cross-border acquisition deal, working directly with the client's US team. When he received the company's financials, the revenue growth figures stood out immediately: the company was projecting a CAGR of around 50%, but the breakdown behind that number was thin.
The Story
Ayush was brought in as the front-end analyst on a cross-border acquisition deal, working directly with the client's US team. When he received the company's financials, the revenue growth figures stood out immediately: the company was projecting a CAGR of around 50%, but the breakdown behind that number was thin.
He dug into the revenue composition first. The core business was contributing roughly 40-50% of revenue, but the remaining half rested on acquisition assumptions: the company had acquired new divisions and was projecting that 30% of its existing customers would adopt those services. To Ayush, that adoption rate looked unsupported.
He requested the underlying customer data and ran his own analysis on historical retention rates. He rebuilt the revenue model using a conservative adoption scenario, stress-testing what the business would look like if the adoption assumptions failed, and anchoring the valuation to the core business performance instead.
The revised five-year revenue CAGR came out at around 34-35%, compared to the company's stated 50%. The valuation dropped from the company's ask of $1.8 billion to a range of $1.0-1.2 billion. Ayush's client closed the deal at $1.2 billion, at the actual value rather than the inflated one.