How we value a business is as much an art as science
What is fair value for an enterprise comes down to what someone might pay for the company. A strategic buyer may pay more than others and at times a seller will not sell to a strategic buyer.
Many methods are used to determine value when it comes to a transaction may it be; Book Value, Discounted Cash Flow, Multiple of Cash Flow and Multiples of something else—for example, some industries are valued at a multiple of subscribers, a multiple of revenue, etc.
Weston Delray’s Approach to Valuation
Weston Delray values Enterprises based on their ability generate maintainable, operating cash flows. We typically apply a multiple to the annual, maintainable operating cash flow as our starting point in the valuation process. We use verified EBITDA as a starting point of operating cash flow.