This is not a full company valuation training course, but the two most common ways of valuing businesses are (i) valuing a business as a multiple of its earnings (= relative or comparable company analysis) or (ii) valuing a company as the sum of its discounted cash flows (= DCF valuation).
Comparable company valuation
Companies are often valued as a multiple of their earnings. A buyer might take a business’s earnings and multiply those to calculate the debt free cash free value used in their offer letter.
Comparable company valuation: what multiple to use? The role of past transactions
A buyer might survey comparable company transactions (i.e. past business sales), looking at the relationship of deal valuation to the business’ earnings. Averaging those value/ earnings multiples would help the buyer judge what multiple should be used in the valuation of the company they were looking to purchase.
Picking a multiple for comparable company valuation. The role of share market information
As well as looking at past transactions, a buyer could also survey businesses listed on the share market (each with a published share price). Averaging value/ earnings multiples for share market listed businesses would also help the purchaser determine what multiple to use to value the company they were looking to buy.