Calculator · Market approach
Transaction multiples
Value a company from the multiples paid to acquire comparable companies, with quartiles and a check against industry trading multiples, or from the price of a recent investment rolled forward to the valuation date.
How the market evidence is used
Under IVS 103 the market approach values the subject from prices paid for comparable assets. Guideline transactions use the multiples paid to acquire comparable companies: choose deals close in business, size, date and growth, use the same measure for every deal and the subject, and select a point in the range from how the subject compares. Deal prices are for control and often include synergies, so the result is a controlling, marketable enterprise value; synergies only one buyer could achieve are excluded from market value.
A recent investment in the subject is direct evidence of value if it was at arm's length and recent. Roll the price forward for market movement and milestones, and where the investors bought preferred shares, use the option-pricing backsolve to find the value of the common shares.
Related: Multiples cross-check · Option pricing · Control premium · Equity bridge · Model notes
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