Overview

At the beginning of 2022, AVTI was a standalone gaming company operating in a competitive and rapidly evolving interactive entertainment industry, prior to its acquisition. The business generated revenue primarily from digital gaming content, with performance driven by user engagement cycles, content releases, and platform dynamics typical of the gaming sector.

During this period, AVTI attracted acquisition interest from strategic buyers, reflecting both its underlying cash flow generation and potential synergies as part of a larger platform. This made it an ideal case study for M&A-driven DCF modeling, where valuation is performed from a standalone perspective while being interpreted in the context of a potential acquisition scenario.

This DCF model is designed to simulate a real investment banking M&A analysis. You will forecast unlevered free cash flows, compute discount rates, and derive intrinsic value using a full DCF framework. In addition, you will use trading comparables from the gaming industry to benchmark valuation multiples and better understand how the market prices similar companies relative to AVTI.

Through this exercise, you will learn how to connect operating assumptions to valuation outputs, while building intuition for how market comparables and intrinsic valuation interact in real-world M&A decision-making.

Learning Goals

Develop an end-to-end understanding of how operational drivers translate into long-term valuation through a full 3-statement and DCF model.
Learn how to convert accounting earnings into Unlevered Free Cash Flow (UFCF) by incorporating non-cash items, capital expenditures, and working capital dynamics.
Understand how capital structure and financing assumptions bridge Enterprise Value to equity value and per-share valuation.
Apply WACC to discount future cash flows and evaluate time value of money in valuation.
Understand how valuation is benchmarked using Trading Comparables, and how relative valuation differs from intrinsic valuation.
Build intuition for how assumptions around growth, margins, reinvestment, and market multiples drive overall company valuation.

Key Concepts

Revenue Growth and Operating Margins: Core drivers of AVTI’s operating performance.
EBITDA, EBIT, and NOPAT: Key profitability metrics used to derive cash flow.
Unlevered Free Cash Flow: Cash flows available to all capital providers independent of capital structure.
Working Capital: Modeling operational cash needs tied to revenue growth and business scale.
WACC: Discount rate reflecting cost of equity and debt adjusted for risk and tax effects.
Trading Comparables: Valuing AVTI relative to peer gaming companies using EV/Revenue and EV/EBITDA multiples.
Enterprise Value vs. Equity Value: Understanding how operating value translates into shareholder value.
Fully Diluted Shares Outstanding: Adjusting for options and dilution to compute per-share valuation.