Consolidation--Moguls of M&A

PI: What formula do you use to place a value on a company?

Davis: Once we have decided to purchase a company, there are many different economic and business criteria we consider in determining a purchase price. Earnings and cash flow, quality of the company's customer list, age and condition of the equipment, whether there is any real estate, etc. After considering all of these factors in our model, we arrive at a price, which has generally fallen within a range of three to five times trailing 12-month EBITDA.