The buyer's private equity sponsor is valuing our technology-enabled service business at a low service-industry multiple, ignoring our SaaS-like retention rates. How do we use a regression-based valuation model like the Ankura framework to prove our financial profile aligns with higher-multiple software businesses?

Question

Tyler Smith · Accepted Answer

Financial buyers love to pigeonhole tech-enabled service providers into low services multiples, but if your operational systems deliver highly predictable, recurring revenue, you deserve a software-style premium. To prove this mathematically, move away from subjective negotiations and use a regression-based model like the Ankura framework. This framework allows you to compare your financial performance against a broad dataset of public companies, analyzing key metrics like revenue growth, capital efficiency, and customer retention. By plotting your numbers against this data, you can demonstrate that your capital efficiency and client retention rates match those of high-performing technology firms, rather than standard services businesses. To support this valuation, your operational data must be flawless. Show the buyer how your leadership team uses your V/TO® to align your operations and drive predictable growth. Use your weekly Level 10 Meetings™ to track your customer churn and lifetime value metrics. When you present a buyer with a regression-based valuation supported by clean, systemized operational metrics, you take the emotion out of the negotiation and make it incredibly difficult for their brokers to defend a low-ball offer.