Valuation Approaches at Case Depth
A founder hears two very different numbers for the same company: a banker says buyers may pay 18x EBITDA, while an investor says the cash flows support much less. Both can be right - because valuation is not one formula, it is a disciplined way to translate business expectations into money.
- Valuation answers one question: what is this business, asset or opportunity worth under a specific set of assumptions?
- Use three lenses: income approach, market approach and asset approach. In cases, triangulate rather than worship one number.
- DCF is fundamentals-led: forecast free cash flows, discount for risk, add terminal value, then bridge from enterprise value to equity value.
- Trading comps are market-led: compare similar listed companies using multiples like EV/EBITDA, EV/Sales and P/E.
- Precedent transactions are deal-led: use acquisition multiples, usually reflecting control premium and synergies.
- The best case answer explains the value driver: growth, margin, capital intensity, risk, terminal value or synergy - not just the method.
- Big trap: mixing enterprise value and equity value, or applying a multiple to the wrong denominator.
Big Picture - Valuation Is Triangulation, Not Guesswork
At case depth, valuation is less about building a perfect spreadsheet and more about choosing the right lens for the question. A mature cash-generating business may suit a DCF. A listed company may suit trading comps. An acquisition decision needs transaction comps plus synergy logic. A distressed business may need asset value.
Core Explanation - The Four Valuation Approaches You Actually Need
The core idea is simple: valuation converts a business story into a financial number. If the story says revenue will grow, margins will expand and risk will fall, the valuation should rise. If the story depends on uncertain cash flows, heavy reinvestment or weak moats, the valuation should be conservative.
In case interviews, you rarely need a 20-tab model. You need to know which approach fits the decision, what inputs matter, and how to sanity-check the result.
The Case-Ready Valuation Flow
When a case asks “what is it worth?”, do not jump to a multiple. First clarify the valuation purpose. A buyer pricing an acquisition, a founder raising capital, a lender assessing downside risk and a consultant sizing a strategic option will not use the same lens.
Income Approach - DCF in One Clean Mental Model
A discounted cash flow values a business by forecasting future free cash flows and discounting them back for time and risk. In cases, DCF is best when the company has visible operating drivers and the interviewer wants logic, not market mood.
The DCF has three moving parts: the explicit forecast period, the terminal value and the discount rate. Your answer becomes stronger when you explain what changes the number: faster growth, better margins, lower working capital needs, lower capex intensity or lower risk.
Mini worked example: Suppose a business is expected to generate illustrative free cash flows of ₹100, ₹120 and ₹140 crore over the next three years. If the discount rate is 10%, the present value of these cash flows is approximately ₹91 crore, ₹99 crore and ₹105 crore, or ₹295 crore total. If the terminal value at the end of year 3 is estimated at ₹1,600 crore, its present value is about ₹1,202 crore. Enterprise value is therefore roughly ₹1,497 crore before adjusting for cash, debt and non-operating assets.
The lesson: even in this simple example, terminal value dominates. That is why a case-depth answer must test terminal growth, exit multiple and discount rate assumptions.
Market Approach - Comps Are Fast, But Only If Peers Are Real
The market approach asks: what are similar companies or deals valued at today? It is fast, intuitive and commonly used in consulting cases because it gives a market-based benchmark.
But “similar” is doing heavy lifting. Two companies in the same sector may deserve different multiples if one has higher growth, stronger margins, lower churn, better governance, lighter capex or lower regulatory risk. Before using comps, link the answer to competitive landscape and barriers to entry, because defensibility often explains why one business trades richer than another.
Enterprise Value vs Equity Value - The Bridge Candidates Forget
Enterprise value is the value of the operating business available to all capital providers. Equity value is the value attributable to shareholders. In interviews, many candidates calculate one and accidentally present the other.
The bridge is:
Equity value = Enterprise value - debt + cash - minority interest + non-operating assets, with adjustments depending on the case facts.
If you use EV/EBITDA, you are calculating enterprise value. If you use P/E, you are calculating equity value. Never apply an enterprise multiple and call the result share value without bridging.
Definitions - Say These Cleanly in One Breath
- Valuation: the process of estimating the economic worth of a business, asset or claim under stated assumptions.
- Enterprise value: the value of a company’s operating assets available to both debt and equity investors.
- Equity value: the residual value attributable to shareholders after adjusting enterprise value for debt, cash and other claims.
- Free cash flow: cash generated by operations after taxes, working capital needs and reinvestment required to sustain the business.
- Discount rate: the required return used to convert future cash flows into present value, reflecting time and risk.
- Terminal value: the value of cash flows beyond the explicit forecast period in a DCF model.
Case Study - Zomato and Blinkit: Valuing an Adjacency, Not Just a Company
Zomato’s acquisition of Blinkit is a powerful Indian example of valuation where the target was not just a stand-alone business, but a strategic entry into quick commerce.
On a narrow view, a quick-commerce business with high fulfilment intensity, dark-store costs and evolving unit economics can look difficult to value using near-term profits. A pure DCF would be extremely sensitive to assumptions about order frequency, basket size, contribution margin, delivery cost and long-term category adoption.
Zomato’s move into Blinkit should therefore be understood through a strategic valuation lens. The primary driver was adjacency value - access to a high-frequency commerce use case beyond restaurant food delivery. Supporting drivers included overlapping urban customer cohorts, delivery network learning, merchant and assortment data, brand reach and the possibility of improving unit economics through scale and density.
The lesson for case interviews is important: acquisition value can exceed stand-alone intrinsic value when the buyer has credible synergies. But the word “synergy” is not magic. You must specify whether the synergy is revenue synergy, cost synergy, capability synergy or strategic option value.
A shallow answer says, “Zomato bought Blinkit for quick commerce.” A case-depth answer says, “The valuation depends on whether Zomato can turn adjacency and frequency into better contribution margins through density, customer overlap and operating discipline.”
How AI Changes Valuation Approaches
AI does not remove valuation judgment; it compresses the mechanical work and exposes assumptions faster. In 2026, the edge is not “AI gave me a valuation” - it is “AI helped me test the valuation story.”
Practical student workflow: load a company annual report, investor presentation and your valuation notes into NotebookLM. Ask it to produce: “five valuation drivers, five key risks, three peer-selection criteria and likely interview questions.” Then use ChatGPT or Claude to role-play the interviewer and challenge your discount rate, terminal value and peer set. For mock practice style, pair this with practising cases with AI as a mock interviewer.
Interview Relevance
“Our client is considering acquiring a mid-sized company in an adjacent market. How would you estimate what price they should be willing to pay?”
If the case is acquisition-led, connect valuation to entry modes such as organic growth, partnership, joint venture or acquisition. Sometimes the right recommendation is not “pay less” - it is “do not acquire; partner first.”
Common Mistake
The most common mistake is giving a single valuation number from one method and treating it as truth. It costs candidates because real valuation is assumption-sensitive and decision-specific. The fix: always present a range, triangulate at least two approaches, and state the one assumption that can break the valuation.