Valuation
What is your company worth?
Contact Us and one of our M&A Forum professionals will discuss valuation with you.
Valuation Methods
Companies are valued on their future earning potential and the opportunity the buyer has to reap those earnings. Valuations may be expressed as a multiple of revenue or earnings but both are influenced by the degree of certainty that the future performance of the company will maintain or improve its performance.
Once the basic calculations are done from your income statement to arrive at your potential Price/Revenue or Price/Earnings valuation, the next step is to look at factors that may impact your valuation in the eyes of the buyer:
- Project or managed service contracts that are assignable allowing the buyer to retain customers and revenue
- Cost savings through consolidation of operations
- Recasting of EBITDA (Earnings before Interest, Taxes, Depreciation and Amoritization) to add back above market compensation for owners/partners, one-time expenditures on new ventures or revamped operations, settlement of legal action and other non-recurring items.
- Financial performance trends that show steady growth in both revenue and earnings with information to support forecasts for future growth.
Any of these items can impact your valuation in a favorable way. Conversely, declining performance, especially during the course of the negotiations can reduce your value to the buyer.
Valuation Trends
The multiples of revenue and earnings used to calculate valuation are derived from two primary sources:
- Public Company Comps - Company performance for comparable firms in the same sector.
- Transaction Comps - Valuations for firms in the same sector that have been recently sold.
Public Company Comparables for the same business sector are discounted for smaller, private firms due the fact that they are not liquid, and that large firms generally command a premium.
Recent Transaction Comparables are discounted as well since they are usually available on the largest transactions involving at least one public company.
Review research reports on the valuation of public companies and learn more about recent M&A transaction comps in the IT sectors we serve:
Public Company Comps
Recent Transactions
Using the Market - Getting Out There
There is no more certain way to know what your company is worth than to have buyers, real buyers, tell you. Listing a profile on the M&A Forum gets you exposure to the buyers in the market that are ready and able to do transactions now. If your expectations and what the market says you are worth are not close enough for you to consider a transaction, you will be able to make business decisions with information about your company from real buyers that want to do deals. List your business on the M&A Forum to get feedback from buyers today.