Six Myths of Valuing and Transacting Family-owned Businesses

This post contains excerpts  from an Axiom presentation done for the Family Firm Institute.

Myth 1: Firms in my industry always sell for a multiple of revenue.

Myth 2: Public firm transaction multiples are larger than private firm transaction multiples.

Myth 3: Acquirer’s of private firms over pay.

Myth 4: Most transactions are within the same industry.

Myth 5: Foreign buyers play no role in the market for private firms.

Myth 6: Tax status has no impact on firm value.

In summary:

– Owners of private firms appear to leave money on the table even though private firms sell for higher multiples than their public counterparts; that is private firm multiples should be even greater than reported.

– There is no such thing as “the transaction multiple: businesses in the same industry sell for vastly different multiples.

– Tax status impacts value: S corporations are worth more than equivalent C corporations.

– Foreign buyers play a major role in the private firm marketplace.

– Cross industry acquisitions are common in the private market.

For more information and access to the presentation, visit www.axiomvaluation.com

 

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