Category Archives: Valuation

Normalization Adjustments

EBITDA Normalization Adjustments: Where do you Stop?

For public companies, the most cited valuation multiple is the after tax net income multiple (the price-earnings multiple or PE multiple).  For early stage companies it is quite often a multiple of revenues because, either they are not profitable or, they are in a high growth phase, where profit levels are depressed as a result…

Revenue Quality

Revenue Quality: What Does it Really Mean?

Revenue quality is an area of focus for buyers and venture capital/private equity investors.  High revenue quality companies are valued higher than low quality revenue companies.  But what does this really mean and why is this? It is simply a question of risk.  High quality revenues reduce risk and therefore result in a higher valuation.…

Comparable Company Analysis

Valuation – Comparable Company Analysis vs DCF

There are market based valuation approaches such as examining public company trading multiples and comparable transaction analyses, and there are company specific cashflow and earnings based methodologies such as Discounted Cashflow (DCF) analysis.  In this post we review both market based approaches and company forecast analysis. Comparable Transaction Analysis Let’s start with the easier one…

value

What Drives a Strong Value for your Business?

How do you Realize Full Value for your Business? Like any good question, there is more than one answer to this question. In fact, there are two. The first answer concerns the business itself, while the second answer concerns the sale process. A higher EBITDA multiple is paid for lower risk, but, the biggest driver in…