8-8 VALUING A PRIVATELY HELD FIRM The auto parts business has three large publicly held firms: O'Reily Automotive Inc. (Orly), Advance Auto Parts Inc. (AAP), and Auto Zone Inc. (AZO).In addition privately held firm in the industry. Assume ment banking firm aproposal that they consider acquiring Carquest, which owns onger 4,000 auto parts outlets in the United States As a preliminary step in the you have assembled a team of analysts to prepare a preliminary analysis of acquisition price multiples that might be warranted based upon current market conditions. The analyst team went to work immediately and compiled the following set of financial information and potential valuation ratios Auto Zone $4,400.00 $2,120.00 2186 71.62 5,890.00 Net income Earnings per share Interest-bearing debt Common equity Total assets Financial Ratios Debt to equity Gross margins Operating margins Expected growth in EPS (5 yrs) Market Valuations (millions Market capitalization Enterprise value Valuation Ratios Enterprise valuc/EBITDA P/E ratio (trailing) P/E ratio (forward) Beta 7301 120.00 39.51 2,615.73 10.5% 49.1% 16.77% 473% 9.42% 3,240 $3,040 6290 19.42 11% 1121 1.79 125 a. How would you use this information to evaluate a potential offer to acquire b. What do you think is driving the rather dramatic differences in the valuation ratios Carquest's equity? of the three firms? EmailSave