You may be aware that market comparisons are a common tool to value private businesses. Not surprisingly, this methodology gets a full coverage in ValuAdder business valuation software.
In fact, the ValuAdder Market Comps tools use a combination of the industry-standard Comparative Transaction and Guideline Public Company methods under the market approach. This gives you an increased coverage across a wide range of industry sectors.
For industries where private companies abound the direct review of comparable sale transactions is the typical method. On the other hand, in some sectors where companies grow rapidly with a goal of going public, comparison to small cap publicly traded firms is a solid strategy for small professionally managed private companies. Typically, you would adjust the numbers for lack of private firm marketability when making such public to private company comparisons.
There are a number of data sources to choose from. One of the most reliable and best known is the EDGAR database maintained by the US Securities and Exchange Commission (SEC). You can access EDGAR freely online.
The current Market Comps coverage in ValuAdder features 425 distinct industry sectors arranged by the SIC and NAICS codes. The sectors include:
- business and personal services
- food and drink industry
- wholesale and distribution
- health care
- financial services
- energy sector
- and many others
To give you the broadest coverage possible, the ValuAdder valuation multiples are designed for valuation of private small to mid-market companies with market capitalization under about $500M. This includes the vast majority of private businesses and professional practices.
When you use the ValuAdder Market Comps tool, your valuation results are reported in the standard Low – Median – Average – High format. This reflects the statistical nature of the market approach – you compare your company to others that are similar but not identical to your business.