Top Down, Bottoms-Up Reconciliation Model

Most industry analysts and Wall Street bankers, as well as large corporate financial professionals, are well versed in creating top-down analyses. That is, they are used to undertaking "aggregate" market studies and valuations based on third-party-study house reports of market sizes as well as developing market values based on P/E multiples, EBITDA multiples, NPV/DCF models, or some other aggregate metric. The problem with many third-party market studies is that we already know what they will present before we ever purchase the study. That is, we will see a gross market demand slope over the study period increasing at approximately a 45–60 slope.

The period under study will change from one report to another, as will the metrics on the vertical scale, but the slope is almost always the same (Figure 5).

click to expand
Figure 5: Typical Third-Party Market Study Slopes

Hence, we must rationalize aggregate estimates and third-party market studies with a "bottoms-up" analysis.

Wireless Communications and Mobile Commerce
Wireless Communications and Mobile Commerce
ISBN: 1591402123
EAN: 2147483647
Year: 2004
Pages: 139 © 2008-2017.
If you may any questions please contact us: