Valuation process
A structured process is stronger than EBITDA times one multiple.
The process should clarify the decision, test the evidence, make adjustments visible, and explain why selected methods and ranges are reasonable.
- Define the sale, acquisition, financing, or internal decision.
- Review historical revenue, margins, cash flow, working capital, and capex.
- Normalize EBITDA only where evidence supports the adjustment.
- Build downside, base, and upside operating cases.
- Compare multiples, DCF, and transaction evidence where relevant.
- Bridge enterprise value to equity value.
Normalized EBITDA
Reported EBITDA is not always the right valuation base.
Normalization separates recurring operating earnings from relevant adjustments and one-time items. Not every cost is a legitimate add-back, and recurring or necessary costs should not be removed without support.
| EBITDA bridge | Illustrative amount |
|---|---|
| Reported EBITDA | €3.15M |
| Above-market owner compensation adjustment | +€0.18M |
| One-time ERP implementation | +€0.22M |
| One-time legal costs | +€0.10M |
| Maintenance under-spend adjustment | −€0.15M |
| Normalized EBITDA | €3.50M |
Operating scenarios
Downside, base, and upside cases show how assumptions affect value.
Scenario analysis helps a seller, buyer, or investor see how revenue, margin, cash flow, and value may change under different operating assumptions.
| Scenario | Revenue | EBITDA margin | EBITDA |
|---|---|---|---|
| Downside | €21.8M | 13.5% | €2.94M |
| Base | €23.0M | 15.2% | €3.50M |
| Upside | €24.4M | 16.0% | €3.90M |
Valuation lenses
Multiples, DCF, and transaction references answer different parts of the question.
The strongest work usually triangulates methods and explains their evidence and limitations rather than treating one method as universally superior.
Comparable-company multiples
Useful market framing when peers are genuinely comparable in growth, margins, risk, and capital intensity.
Discounted cash flow
Connects value to forecast cash generation but is sensitive to forecasts, discount rates, and terminal assumptions.
Transaction references
Can provide deal context, but timing, synergies, control, structure, and disclosure quality matter.
Valuation cross-check
The selected range is an analytical synthesis.
A multiple-based output and a DCF cross-check may overlap enough to support an illustrative enterprise-value range. The selected range should not be treated as a mechanical average or a certified valuation opinion.
| Valuation item | Illustrative result |
|---|---|
| Normalized EBITDA | €3.50M |
| Multiple range | 5.75×–7.00× |
| Implied enterprise value | €20.1M–€24.5M |
| Illustrative DCF range | €20.8M–€25.7M |
| Selected illustrative EV range | €20.5M–€25.0M |
Purchase-price sensitivity
Small changes in EBITDA and the selected multiple can materially change value.
A sensitivity matrix makes the dependence on assumptions visible and helps prevent one base-case output from being mistaken for certainty.
| EBITDA / Multiple | 5.5× | 6.0× | 6.5× | 7.0× |
|---|---|---|---|---|
| EBITDA €3.1M | €17.1M | €18.6M | €20.2M | €21.7M |
| EBITDA €3.5M | €19.3M | €21.0M | €22.8M | €24.5M |
| EBITDA €3.9M | €21.5M | €23.4M | €25.4M | €27.3M |
Enterprise to equity
The price paid for equity is not always enterprise value.
The bridge may include debt, surplus cash, working-capital or debt-like items, and transaction-specific adjustments. Each item should be defined and supported.
Decision drivers
What can change the valuation most?
The largest drivers depend on the company and transaction, but recurring earnings quality, forecast credibility, working-capital needs, reinvestment, concentration, leverage, and the relevance of market evidence often shape the final range.
- Evidence supporting EBITDA normalization
- Revenue growth and margin durability
- Customer or supplier concentration
- Working-capital and capital-expenditure requirements
- Forecast cash conversion
- Net debt and debt-like items
- Comparability of selected peers or transactions
- Downside resilience and financing capacity
Scope depth
A light range and a transaction-ready model answer different needs.
An initial analytical range may be suitable when information is limited or the question is exploratory. Deeper work is usually appropriate when a transaction is active, forecasts need review, normalization is material, financing structure matters, or decision-makers require a custom model and documented sensitivities.