Demystifying Private Company Valuation

Abstract

Many private company owners are fixated on the estimated value of their business, often applying “headline” or “word of mouth” multiples of revenue or earnings to their financial performance. Few owners take the time to invest in the analysis a buyer will likely apply, which most often incudes a discounted cash flow, return on investment analysis, and multiple analysis. The author urgs clients to avoid the headline hype and remove the emotion from their expectations through a rigorous analysis and thus demystify the valuation process. This might also improve how the company is managed and performs.

TOPICS: Private equity, fundamental equity analysis, risk management