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.
– 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.