Public Company Multiples: Good Proxy for Value?

Often I find myself discussing valuation with private business owners and many times they will bring up market multiples of their larger, public competitors as a point of reference. Unfortunately, this often provides an unrealistic view of value for their smaller, middle-market business as private companies have an inherent liquidity discount that public companies do not have.

 

Public companies also have the benefit of size and scale which contributes to higher valuation multiples. Other attributes like the ability to buy and sell shares in the open market and raise capital through equity offerings further support these valuation premiums.

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