You might have heard the term “football field” or “valuation football field” from your friends working in investment banking or in a M&A course before. In case you want to know what it means and what is it used for, here comes a brief summary:
A football field is essentially a graph used to compare and summarize the results of different valuation methodologies to value a company.
Typically, a football field graph looks something like this:
Preliminary Valuation: Football Field – Source: Barclays CapitalThe good thing about such a chart is that it shows the varied range of values from which one can gain an insight into where an average and a target valuation lies when compared to several alternatives.
The football field generally includes: a range of valuation techniques, their range (of prices or multiples) and the visual representation of that range.
Why do we use football field?
Valuation process generally involves making many assumptions about the company’s business performance and future growth that involve many uncertainties. To address this issue, analysts generally use more than one method of valuation.
Football field allows us to easily summarize those methods on one page.
A useful resource: The step by step guide on creating a football field
Breaking Into Wall Street has developed a great step by step guide that allows you to develop a template for football field and use it whenever the need to use it comes up.
Here is a roughly 17-minute video of their tutorial:
If you want to check out their guide, you can find it here.
