I do not agree that the buyer type determines the correct valuation methodology. This conflates the buyers discretionary choice in operations (which determines free cash flow) and business valuation. Put another way, a business is worth what a business is worth. If a buyer is, for example, strategic and can immediately cross-sell and upsell to the target's client base, it does not make the target more valuable (why should a buyer pay more for value THEY are bringing to the transaction?). If a buyer elects to hire a manager and be absentee, it does not make the business less valuable - it simply impacts free cash flow as a result of the buyer's discretionary operational decisions. From a cash flow perspective the target may be more or less attractive to the buyer, but the intrinsic value of the target is static. I've found that the SDE/EBITDA cross-over point is shockingly low. If you take the midpoint multiple of SDE at 2.5 and the midpoint multiple of 5x EBITDA with a $125,000 executive load, the target valuation is equal at just $250,000 SDE and $125,000 EBITDA (equating to $625,000 in enterprise value). This means using SDE in larger transactions or EBITDA in smaller transactions will under value the target.

Well presented - thank you. Concur with your comment that many brokers in the main street / LMM are not well versed in critical aspects of business valuation which does a disservice to all.