By Andy Clausen, ASA-BV/IA, Managing Director, Business Valuation
Establishing a defensible valuation is the foundation of every successful M&A transaction. Before bringing your company to market, it’s essential to understand how potential buyers will view value and how key financial metrics influence negotiations. LCG helps business owners interpret these metrics to set realistic expectations and achieve optimal outcomes.
How Are Valuations Determined in the Middle Market?
Valuation in middle-market and lower middle-market M&A is typically expressed as a multiple of EBITDA . However, no two companies command the same multiple. Factors such as growth trajectory, margin stability, customer diversification, management strength, and market position all play a role.
LCG’s team analyzes historical performance and forward-looking projections, comparing them with recent transactions across your sector. This process establishes a valuation range that’s both data-driven and market-informed.
Why Are Market Multiples So Important?
Market multiples provide context. The direct fluctuation tied to interest rates, capital availability, and investor sentiment shows how comparable companies are valued in the current environment. Staying informed helps sellers understand timing and structural considerations, such as whether to pursue an all-cash sale or a rollover equity partnership.
What Qualitative Factors Affect Value?
Beyond numbers, buyers look at leadership depth, brand reputation, intellectual property, and scalability for growth. Strong operational visibility and recurring revenue streams tend to push multiples higher.
Conclusion
Understanding valuation empowers sellers to make informed, confident decisions. LCG brings real-time market perspective and valuation expertise to every engagement, ensuring clients go to market with clarity, credibility, and leverage.
To learn more about pre-sale valuation strategies, contact Andy Clausen, ASA-BV/IA, at [email protected].