Monte Carlo Simulation (MCS) is a powerful statistical technique used to model and analyze complex systems with inherent uncertainty. The presentation provided a comprehensive overview of MCS, including its mechanics, suitable probability distributions, available simulation tools, along its applications in valuation.
The option pricing method is widely used for equity allocation in privately held companies with multiple classes of stock.
The option pricing model (“OPM”) relies on financial option theory to allocate value among different classes of members’ equity based upon a “claim” on value on the expected date of exit. Under the OPM, the values of the various classes of shares are estimated as the net value of a series of call options, representing the present value of the expected future returns to the shareholders at a series of exercise prices that coincide with the liquidation and conversion preferences of the holders of preferred and ordinary shareholders.
We are proud to announce that we have developed a proprietary tool tailored for performing Monte Carlo Simulations directly within Excel for the most commonly used distributions and generating both summary metrics and individual simulation results as output.
A pharmaceutical company (the “Acquirer”) acquired a biotechnology company (the “Company”) in exchange for an upfront payment and certain payments contingent upon successful achievement of future regulatory and sales milestones for certain product candidates being developed by the Company (the “Contingent Consideration”).