Multiplier Method—Ideal for an Initial Sales Price Estimate
There are various methods for determining the sales price; among these, the so-called multiplier method is well-suited for an indicative estimate due to its transparency and independence from planning assumptions. In this method, ratios between the sales price and financial metrics are derived from completed corporate transactions. These ratios are then used as a basis for determining the sales price of future transactions. Such ratios are called multiples. They depend on the industry, the size of the company, and a variety of other factors.
Nevertheless, these multiples always represent only average values and should therefore be used only to a limited extent as a basis for individual business sales.
This is because the actual sale price is determined by the buyer’s willingness to pay and the prevailing market conditions. The sale price can be optimized through a bidding process, which, by pitting multiple investors against one another, achieves the optimal purchase price for the specific company and market situation. For an initial assessment, however, the multiplier method is ideally suited due to the average empirical values used in this approach.
Various Factors Influence Enterprise Value
When determining enterprise value, the enterprise value calculator from Walther Transaction and macx. takes into account five quantitative and five qualitative factors. On the quantitative side, industry, revenue, EBIT, financial debt, and cash and cash equivalents play a role. The qualitative factors include portfolio diversity, current investment needs, the company’s dependence on key executives, market share, and the risk posed by substitute products. All of these factors—and many others—influence the valuation and can positively impact the sale price of your company.
Analysis Takes Risks and Opportunities into Account
Based on the input provided, users of our company valuation calculator receive an estimate of their company’s equity value via email: first, the calculated average or expected value, and second, a possible range for the company’s value. This range illustrates the extent to which risks and opportunities that can influence the company’s value—and thus its equity value—are factored into the calculation. It is worthwhile to discuss the results in a personal meeting afterward.
More information about the free company valuation calculator from Walther Transaction and macx.:
