Company valuation methods: what Clearwater was worth at $24.55

Permira and Warburg Pincus agreed on December 20, 2025 to take Clearwater Analytics (NYSE: CWAN) private at $24.55 a share in cash: $7.6 billion of equity, $8.4 billion of enterprise value, and 47.1% above the $16.69 unaffected price of November 10. Clearwater sells investment accounting and reporting software to insurers, asset managers and corporate treasuries. The special committee’s banker, PJT Partners, and the board’s banker, J.P. Morgan, each gave an opinion that the price was fair, and the merger proxy prints the work behind both.

We gave Compound the merger proxy, both banks’ fairness opinion decks and the filings, and asked what Clearwater was worth. On management’s plan, Compound found the offer above the midpoint of seven of its eight methods and 9.3% above their median midpoint, so its memo calls the price fair. How far above depends on the DCF, where two choices, stock pay and growth after the forecast, move the value by several dollars a share. Compound also ran a stress case that trims the plan where the company’s record is weaker. Every spreadsheet below is from one Compound run, cut to the rows that matter.

The three standard methods value a company in two ways. A discounted cash flow (DCF) values it on its own cash flow: intrinsic or absolute valuation, the appraiser’s income approach. Trading comps and precedent transactions value it on what others pay: relative valuation, the market approach. When the buyer is a sponsor, an LBO adds a fourth method, the most a buyer can pay and still earn its return. A football field is the chart that sets each method’s range of value per share side by side, with the price drawn across it.

The fairness opinion’s football field, rebuilt from the proxy

Both banks found the price fair. Compound started by putting their work side by side.

A fairness opinion is the banker’s letter telling a board that the price is fair, from a financial point of view, to the shareholders. The proxy summarizes the analyses behind it, method by method, and a going-private deal often files the bankers’ board presentations as well. Compound read both and put every range on one sheet.

The shape is the usual one for a control deal: the offer sits above the midpoint of every market bar but J.P. Morgan’s precedent cash-flow bar, above the top of both precedent revenue bars, and inside both DCFs. Two details matter more than the shape. J.P. Morgan’s widest bars run on unlevered free cash flow before stock-based pay. Both DCFs reach their central cases, $23.75 and $24.54, with 4.5% to 6.5% growth forever after 2030. Every bar rests on choices like these: which peers, which deals, which cash flow, which growth rate. The table sets out the banks’ choices beside Compound’s, from the proxy, the decks and Compound’s workbooks.

Compound’s DCF on the plan sits below the banks’ for one main reason, the growth rate after the forecast. All three take stock pay as a cash cost and add the tax attributes, so neither explains the gap. Compound’s DCF tab walks PJT’s $23.75 to its own $19.78.

The DCF model page then walks $19.78 to Compound’s stress case of $14.68: growth 2 points a year lower from 2028E, a margin up to a point lower, and stock pay at the midpoint of the $135 million to $140 million management guided for 2026, rising with revenue.

Equity value to enterprise value, then the trading comps redone

Against all 18 of the bankers’ peers, the offer is 11% above the median EBITDA multiple.

Every multiple needs one basis, so the work starts with the bridge between equity value and enterprise value:

Equity value = price × diluted shares
Enterprise value = equity value + net debt

Enterprise value is what you pay for the whole business, whoever is owed. Diluted shares follow the treasury stock method: Class A and Class B shares, unvested RSUs and PSUs in full, and options net of the shares their exercise proceeds would buy back, all from the share table in the merger agreement.

EV/EBITDA is the multiple most buyers of software price on, so it carries the comps. Compound priced all 18 peers the two banks used at the November 10, 2025 close, Clearwater’s unaffected date, on the Street’s CY26E estimates in the bankers’ decks. It also screened each peer against Clearwater’s 15.3% organic growth and 36% EBITDA margin: a fair comparison sits within 5 points of the growth and 10 points of the margin.

The 18 peers trade at a median 22.5x CY26E EBITDA, with a 25th to 75th percentile of 19.7x to 26.4x. An EBITDA multiple valuation runs the bridge in reverse: the multiple times management’s $338 million of 2026 EBITDA is enterprise value, less $794.8 million of net debt and other, divided by diluted shares. At the median that is $21.89 a share, and across the quartiles $18.87 to $26.07. The offer, at 24.9x, is 11% above the median multiple. These are the comps bars on the football field below.

The comparable company analysis page prices the same 18 peers on the same date and gets a median within 0.3x of this one. It puts the offer at 25.3x because it divides by the Street’s $333 million of 2026 EBITDA. This page uses management’s $338 million, because every bar on a fairness opinion’s football field runs on management’s plan.

The screen splits the two banks. Seven peers are fair comparisons, and six of them appear only in J.P. Morgan’s set. Nine flatter the price, and all nine are in PJT’s set: digital banking and vertical software growing slower or earning thinner margins. Veeva and Descartes earn margins well above Clearwater’s. The seven closest peers trade at a median 24.7x, and on them the offer is 1.1% above the median. That is the generous end of the comps, so the field keeps all 18. A regression of revenue multiples on growth plus margin across all 18 peers gives 8.5x and $23.26, a weak fit (R² 0.42).

Comps price a minority stake on an ordinary trading day. Control is priced by the deals.

Precedent transactions and the 47.1% control premium

Against sponsor take-privates, the offer is the richest deal on revenue and a middling one on EBITDA.

A precedent multiple is comparable only if it is on the right number. Compound took the 15 deals in the two banks’ lists, kept the 12 sponsor take-privates apart from the three strategic deals, and recorded each premium on the basis the target disclosed. Smartsheet and Cvent disclosed premiums only to a 90-day average price, so they stay in the multiples and out of the premium statistics.

The offer is the richest sponsor deal in the set on revenue and a middling one on EBITDA, at the 45th percentile, because Clearwater’s margin is higher than most targets’. Applied to Clearwater’s 2026 figures, the sponsor quartiles give $16.01 to $21.78 on revenue and $19.44 to $36.01 on EBITDA, and the premium quartiles give $21.14 to $25.99.

The 47.1% premium needs one caveat, which Compound put in its memo. The unaffected price sat near its 52-week low of $15.75, and the stock had traded as high as $32.75 that year. Against the 90-day average price, the premium falls to 31.5%, so about a third of the 47.1% is the stock recovering from a low.

DCF and LBO bars: what the cash flow supports

The DCF straddles the offer on one choice, and the LBO puts the offer just above what a sponsor can pay for 20%.

The DCF model page builds the DCF from the same proxy, extended to 2035 on management’s own terminal profile. With the $127 million a year of stock pay as a cash cost, the basis of the proxy’s headline free cash flow and of both banks’ DCFs, it gives $19.78 a share, and $17.69 to $22.42 across WACC and terminal growth ±50 basis points. Adding stock pay back, as the proxy’s second, pre-SBC version does, gives $24.20, and $21.78 to $27.24. One choice, whether stock-based compensation is a cost, moves the value $4.42 a share. The offer sits inside the add-back bar and above the top of the cash-cost bar.

Both bars run on management’s plan, because that is the plan a fairness opinion tests. Compound’s stress case on the DCF page, with slower growth, a lower margin and stock pay at the company’s guidance, gives $14.68, and $13.12 to $16.63.

The LBO answers the sponsor’s question: what could a buyer pay and still make 20% to 25%? Compound built it on the consortium’s committed financing, from the merger proxy and the debt commitment letter: a $2.7 billion seven-year term loan at SOFR plus 4.50%, with up to half the margin payable in kind for two years. The loan is 8.0x management’s 2026 adjusted EBITDA. On 2025 it is 10.5x consolidated EBITDA, management’s $248 million plus $10 million of public-company savings, or 10.9x the $247 million of adjusted EBITDA Clearwater guided to. The $500 million delayed-draw loan and the $325 million revolver stay undrawn. At $24.55 the sponsors fund $5.8 billion of equity at close, inside their $5.9 billion commitment.

The model states its assumptions on the LBO tab. It closes on December 31, 2025, to match PJT’s DCF (the deal actually closed on June 25, 2026), holds term SOFR flat at 3.70%, takes the payment-in-kind option in years one and two, and sweeps all cash above $100 million into the term loan. It follows PJT’s illustrative LBO in cutting stock pay to $32 million a year, adding $10 million of public-company savings and paying management a 7.5% promote.

At a 22x exit, the middle case, a 20% to 25% return supports $20.61 to $24.26 a share, so the offer sits just above the top of the bar, and a sponsor paying $24.55 earns 19.7%. Clearing 20% at the offer needs an exit above 22.3x trailing 2030 EBITDA. The peers’ 22.5x median today is on forward 2026 EBITDA, so the two multiples are not on the same basis. At 18x the return falls to 14.7%. PJT’s illustrative LBO carried less debt than the committed package: 8.0x 2025 EBITDA, against 10.5x 2025 consolidated EBITDA for the committed loan. At a 22.5% IRR with exits of 22x to 30x, PJT’s LBO gives $22.00 to $28.75. The LBO model page builds the structure in full.

Football field chart: where the $24.55 offer sits

On management’s plan the offer sits above the middle of the field, and the DCF bars show how much it rests on stock pay.

Read like the special committee, the field is a yes. The offer is above the midpoint of seven of the eight methods built on management’s plan and above the top of four, and 9.3% above the median midpoint of $22.45. Only the precedent EBITDA bar, the widest on the chart, puts the offer below its middle. The stress case, at $13.12 to $16.63, shows what happens to the DCF if growth, margin and stock pay follow the company’s record instead of the plan. It tests the plan. It is not a price anyone bid.

Read for what it does not show, the field is weaker. The market anchors were soft at signing: the stock sat near its low, and the EBITDA comps move from $21.89 to $24.25 at the median depending on whose peers you keep. The bar that decides the answer is the DCF, and it straddles the offer on the stock-pay choice alone. The market check tested the price from both sides. Before signing, the only rival bid was $20.00 to $22.00, and Sponsor Party C would not finance above $24.00. After signing, the two banks took the deal to 44 parties in the go-shop, 20 sponsors and 24 strategic buyers, and none made a proposal to top $24.55. Compound also laid the field out as a one-page summary of analyses, free to download below.

Compound’s memo to the committee adds the questions the proxy’s background section raises:

• Why the final price is $0.05 above the consortium’s opening $24.50 bid, made when the stock was $19.00. The consortium had cut its price to $24.25 on December 14.
• Why the go-shop barred approaches to the bidders from before signing.
• Why both banks capitalize a plan still growing 18% in 2030 at 4.5% to 6.5% terminal growth.
• Who bears the $127 million of annual stock pay.
• How it weighed the banks’ other fees, which the proxy discloses. In the two years before its opinion, J.P. Morgan recognized about $65 million of fees from Warburg Pincus, $53 million from Francisco Partners, which joined the consortium as an equity investor, and $39 million from Permira, each including its controlled portfolio companies, against $18 million from Clearwater. PJT received less than $45 million from Francisco Partners portfolio companies, and smaller amounts from companies tied to Permira.

What the football field says about the deal

The field says the price was fair on management’s plan, and the DCF shows what that plan has to deliver.

The merger closed on June 25, 2026 at $24.55. The fairness opinions were right about what they covered. On either bank’s choices the price sits above the midpoint of every market bar but J.P. Morgan’s precedent cash-flow bar, above the top of the precedent revenue bars, and inside both DCFs. The only rival bid, from a sponsor, was $20.00 to $22.00. The go-shop reached 44 parties and produced no proposal. What the field cannot settle is the DCF, where the answer depends on whether $127 million a year of stock pay is a cost, and the LBO, where the buyers earn 20% only if they sell for more than 22.3x 2030 EBITDA. The price was fair on management’s plan, which is the test a fairness opinion applies. Compound’s stress case, at $14.68, shows how much of the price rests on the plan’s growth holding after 2027.

The workbook from this run is free to download, with every input cited to its filing.

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