Valuation: M&A with DCF

Place students inside a DCF-driven M&A deal

Students value an M&A target with a full DCF model, then negotiate the price with the team on the other side of the deal. Professors can monitor progress, manage timings and use the final deals for debriefing or optional assessment.

4-hour team-based simulation
Modelling - Deal Making
In-class, online or hybrid delivery

A full DCF, built and defended line by line

Two teams value the same acquisition target from the same information pack, build their own five-year forecast in Excel, and arrive hundreds of millions apart. They then have to agree one price between them.

Build the model

Each team forecasts five years of cash flow in Excel, works out the discount rate (WACC) and adds a terminal value.

Agree the assumptions that set the price

Growth, margin, capex, working capital, terminal growth and WACC are settled one at a time, each backed by a reason the other side accepts.

Compare outcomes across the room

At the end every deal is shown side by side, so the class can see how far apart two defensible answers can sit.

At a glance

Duration

4 hours

Run it in one block, or split it across classes. You can change how long each stage runs.

Format

Team-based deal structuring

Teams of three to five take the seller or the buyer side of the same sale.

Level

UG, PG and MBA

Suitable for students applying valuation, corporate finance and M&A.

Professor tools

Control and live oversight

Pace the session, watch every team as they work, and download the model each team builds.

Prerequisites

Helpful, not required

Students learn by doing. The lecture slides cover cash flow, the cost of capital (WACC) and the terminal value in about 45 minutes.

Delivery

Classroom, online or hybrid

Teams can build the model at home and negotiate in class, or do everything online over about a week.

Assessment

Optional team evidence

No grade is produced. You can download every team's results and the model it built.

Course fit

Valuation, Corporate Finance & M&A

Fits Corporate Finance, Mergers & Acquisitions, Valuation, Investment Banking, Financial Modelling and Private Equity.

How seven assumptions build one price

Four assumptions shape the cash the business produces. One sets what happens after the forecast ends, and one sets the rate everything is discounted at. Together they give the price. The seventh decides how that price is paid.

Diagram showing how M&A Deal Terms Create and Allocate Value

1. Intro | 10 minutes:

A short briefing video in four parts: the deal and the two companies, how the simulation runs, how a DCF builds a price, and how teams are scored.

Students: watch the briefing and read the aims for their side.

You: check everyone is in, then start the clock or move the stages yourself.

2. Analysis & Due Diligence | 100 minutes:

Teams read the shared information pack and the private briefing written for their side, agree an approach, then download the Excel template and build their model. The work splits naturally: one student on revenue, one on costs and investment, one on the market and the discount rate.

Students hand in: an opening price, how they want it paid, and the Excel model they built.

Worth stressing: every number needs a short reason, and a range rather than a single figure.

You: send an alert reminding teams to upload the model before the stage ends. This stage can also run at home.

3. Deal Structuring | 100 minutes:

Paired teams meet, open each other's models and work through the seven assumptions in the order a DCF is built. The buyer proposes a figure and a reason; the seller accepts it only once convinced. Either side can reopen anything already settled. Market news arrives during the stage and bears on particular assumptions.

On screen: the valuation updates as each assumption is agreed, next to the discount rate and how much of the value sits beyond the forecast.

Students finish by: agreeing all seven, then both teams approving the deal.

You: remind groups to approve. A group that agrees everything but never approves scores zero.

4. Reflection | 20 minutes:

Every deal in the room is summarised across four tabs, and students download a certificate.

Students: compare their forecast with management's, and their price and payment with the rest of the class.

The point to land: the same information supported very different prices. There is no single right answer, only one you can defend.

Why professors use it

See the thinking behind the number

Agreeing a valuation one assumption at a time makes both teams open their model and justify every figure, instead of splitting the difference on a single price.

Show where the value really sits

Most of the price comes from the years after the forecast ends, so a small change to the discount rate moves it more than a long argument about spending.

Price and payment are different things

Two groups can agree the same price and still end up with very different deals, depending on how much is paid in cash rather than shares.

What the experience looks like

You run the session from the Admin Panel. Students move through the case, the Excel model and the deal table from a single screen.

Control the timeline

Click a stage to move everyone there. Play runs the session by itself, Pause holds the clock, Stop locks student screens, and Adjust changes how long each stage runs.

Set up teams and watch them work

Create teams, pair sellers with buyers, open any student's screen to see exactly what they see, and follow every team's numbers and chat as they go.

Send alerts and learn the tool

Send a message to the whole room mid-session. The First Time User Guide walks you through every control and shows you the student view before you run it live.

Case materials students work with

Both sides get the same information pack, and each side gets its own private briefing on the other. Every team downloads the same Excel template, so any difference in value comes from judgement rather than from different data.

The shared information pack

Issued by the seller's adviser to both sides: the business, three years of financial history, management's five-year plan, the client base, the market, similar listed companies, the debt and the market data needed for the discount rate. It sets out facts and recommends no price.

A private briefing for each side

The seller learns things that support a higher price. The buyer learns things that support a lower one. Neither side sees the other's briefing, so each has to decide what to reveal and what to hold back.

6 mins

Student Intro Video

Four short parts: the deal and the two companies, how the simulation runs, how a DCF builds a price, and how teams are scored.

Assess the model and the reasoning, not just the price

Assessment is optional and the simulation can be run ungraded. No grade is produced. You can download every team's results and the model it built, and weigh those alongside what you saw in the room.

What you can assess

• The Excel model each team built: the forecast, the discount rate and the terminal value
• The reason each team wrote beside every assumption it agreed

How to read the results

• Compare sellers with sellers and buyers with buyers, because the two sides are chasing opposite goals
• Read the price and the payment together: the same price can be a very different deal

Each team is compared with the other teams playing its side. Sellers score higher for a higher price and more cash. Buyers score higher for a lower price and less cash. A group that never reaches a deal scores zero on both sides.

The score measures the outcome, not the work behind it. A team can reach a strong number by pushing hard rather than by modelling well, and a careful team can lose ground to a counterpart who gave in early. The model each team uploads, and the reasons it recorded against each assumption, say far more about what students understood.

You can also ask students to hand in a short written reflection once they have seen their results. The simulation does not collect or grade that.

Set up the teams, then let the simulation run

The session can run by itself once started. Coaching is optional, and you keep control of teams, timings and pace throughout.

Step 1

Create and pair the teams

Teams of three to five. Use an even number, so every seller is paired with a buyer to negotiate against.

Step 2

Set the timings

Keep the standard times, or change them to fit one class, two classes, or a window of several days.

Step 3

Start and manage the session

Play starts the clock, Pause holds it and Stop locks student screens. Nothing already submitted is lost.

Step 4

Watch and prepare the debrief

Follow teams as they work and download their models. Remind each group to approve its deal in time.

Professor Resources

Everything needed to prepare, run and debrief the Valuation: M&A with DCF simulation is organised within the resources below.

Discounted Cash Flow (DCF)
Free cash flow forecasting
Growth and margins
Cost of capital (WACC) and CAPM
Beta: unlevered and relevered
Terminal value
From enterprise value to equity value
How a deal is paid: cash, shares and earn-outs
Due diligence

Creators of the Valuation: M&A with DCF Simulation

These industry professionals were involved in the inception, creation, development, testing and optimisation of the simulation.

Investment banking experience across UBS, Morgan Stanley, and Deutsche Bank. Studied Mathematics at Saratov University.

Andrey Simonov

Former Practice Specialist in McKinsey’s Corporate Finance team in Germany and Finance professor at Aberdeen University.

Gerhard Kling

Senior investment banker at Morgan Stanley with experience in M&A and TMT coverage across New York and San Francisco. Studied business at Kellogg.

Bharat Venugopal

Assistant Professor of Finance at Tilburg University, teaching corporate finance courses. Also lectures at TIAS Business School.

Fatemeh Hosseini

Worked in the finance department of Precomp Tools. Studied Engineering and holds an MSc in Corporate Finance from Bayes.

Aatmay Upponi

FAQs

Both put students on opposite sides of the same sale, but they value the company in different ways. Multiples prices it against similar listed companies and runs in a shorter session. This one asks students to build the value up from the company's own cash flow, which means forecasting five years, working out a discount rate and defending what happens after the forecast ends.

Running both across a module works well: students see the same company reach a different price under each method, and the gap between the two is itself worth discussing.

A single number invites both sides to anchor and then split the difference, which hides the reasoning underneath. Working through the model assumption by assumption makes each team open it up, see which figure actually moves the price, and attach evidence to every input.

It also creates real trade-offs. A team can give ground on investment to win on the discount rate, or accept a lower price in return for more cash. Because the valuation updates as each assumption is settled, both sides watch every concession land.

Yes, in two ways. You can set each stage to run until your deadline and press play once, so the stages move on by themselves. Or you can keep it paused, give students a deadline and move to the next stage yourself when it arrives. Students can keep working while it is paused.

A common pattern is to run the intro in class, let teams build their model at home over a few days, then bring everyone back to negotiate.