medium · Investment Banking valuation-core
A company has a $200 million Net Operating Loss (NOL) balance. A strategic acquirer is valuing the company.
How should the NOL be treated in the valuation?
- Ignore the NOL, since tax assets never affect the operating value of the underlying business.
- Add the full $200 million directly to the Enterprise Value bridge, treating it exactly like cash.
- Calculate the PV of future tax savings (subject to Section 382 limits) and add it to the valuation.
- Subtract the $200 million from the purchase price, treating the full NOL balance as an assumed liability.
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