Olo Dcf Valuation

WACC Calculation (CAPM)

Cost of Equity = Risk-Free Rate + Beta × Equity Risk Premium
WACC = (E/V × Cost of Equity) + (D/V × Cost of Debt × (1 - Tax Rate))

• Risk-free rate: 10-year Treasury yield
• Equity risk premium: 5-7% (Damodaran)
• Beta: Use comparable public companies, unlever/relever for target capital structure
• Size premium: Add 2-4% for small/mid-market targets

Projection Methodology

1. Revenue: Start from last reported, apply growth rates (declining toward terminal)
2. EBITDA: Apply margin assumptions (converge toward industry median)
3. Free Cash Flow: EBITDA - Taxes - CapEx - Change in Working Capital
4. Terminal Value: Gordon Growth Model or Exit Multiple method
5. Discount: Apply WACC to each year's FCF + terminal value

Terminal Value

Prefer Exit Multiple method for M&A (matches how buyers think):

• Apply EV/EBITDA multiple to terminal year EBITDA
• Cross-check with Gordon Growth implied multiple
• Flag if implied perpetuity growth exceeds 3%

Required Output

Always present:

• Enterprise Value range (low / base / high)
• Equity Value (EV - net debt)
• Implied EV/EBITDA multiple (sanity check against comparables)
• Sensitivity table: WACC (rows) vs Terminal Growth or Exit Multiple (columns)
• Football field chart if multiple valuation methods available

M&A-Specific Considerations

• Apply a control premium (20-40%) if valuing for acquisition vs. minority stake
• Consider synergy value separately from standalone DCF
• Discount rate should reflect buyer's cost of capital, not target's
• Model integration costs as a deduction from synergy value
• Present with-synergies and without-synergies valuations separately