What are the best metrics to value a private company?
June 06, 2024
by an member from Chapman University - The George L. Argyros School of Business and Economics in Evanston, IL, USA
Most of my experience in valuations have been done on public companies, and using a Bloomberg terminal to find all of the numbers. When I have started to value private companies it has been a bit of a struggle for me, since I have a lot less information and less resources at my disposal. Does anyone have any tips?
from University of New Haven in Cromwell, CT, USA
Is the company similar to any or many of the companies surveyed in the metric reporting?
Do the transaction represent strategic or other considerations?
Are the transactions all cash or owner financing - or deferred compensation or salaries? Need to look at the underlying transaction data. A lot of this info is available in BVR
Pre-tax income is important, so to is EBITDA - neither address balance sheet issues - specifically the ability to service debt and the capital structure of the subject company.
My preference for valuation is Net Cash Flow - typically net income plus non-cash items less capx, wc needs plus borrowings.
from Portland State University in Portland, OR, USA
You have free access to DealStats data (listed as BVR Transactions at the top of the site). Take a look at some comps, what they sold for, and what their multiples are. You can make upward/downward adjustments when evaluating the differences between your subject company and the comps you are reviewing.
Having some empirical data is better than having no data at all - from there, you add your professional judgment.