Who asked: the board of Pellham Instruments (made up for practice). A competitor has offered $38.00 a share in cash. The board must tell shareholders whether to accept, and wants a first view before its advisers report.
The data: the offer, the undisturbed share price, shares, net debt and EBITDA; the ranges from trading comps, precedent transactions and a DCF; and the median premium in past deals. All on the Fairness sheet.
What done looks like: the premium against what buyers usually pay, the multiple the offer implies, each method's range per share with its midpoint, and a one-cell verdict: "Fair" or "Ask for more". This is practice, not advice to any shareholder.
When a company receives an offer, its board asks one question: is the price fair? The analysis behind the answer uses every method from this unit, in seven steps that build on one sheet:
- the premium offered against the median premium in past deals;
- the equity value, enterprise value and multiple the offer implies;
- the trading comps range per share;
- the precedent transactions range per share;
- the DCF range per share;
- the offer against each method's midpoint;
- the verdict.
The methods often disagree, and this case is built so they do. That's normal: comps miss the control premium, precedents include it, and a DCF depends on its forecast. A good summary shows all three and states which way the weight of evidence leans.