We want to use a regression-based model like the Ankura framework to defend a premium valuation based on our superior capital efficiency, but the buyer's broker is stuck on basic revenue multiples. How do we use our quarterly Rocks to generate the data that proves our superior capital-to-asset conversion?

Question

Tyler Smith · Accepted Answer

Brokers use simple revenue multiples because they are lazy and easy to calculate, but this method penalizes businesses that run highly efficient, asset-light operations. To force a sophisticated conversation, you must present the buyer with irrefutable, data-driven proof of your capital efficiency.

You can build this proof by creating a specific, cross-functional Rock for your financial and operations seats. This Rock should focus on gathering your historical balance sheet data and calculating your return on invested capital and asset turnover ratios over the past three years. Compare these metrics against the publicly available datasets used in regression models like the Ankura framework.

When you show that your business generates double the cash per dollar of capital invested compared to the industry average, you can demonstrate that a standard multiple is mathematically incorrect. The regression model proves that your superior cash generation reduces the buyer's risk, which justifies a higher enterprise value.

Present this analysis as a clean, objective data package during due diligence. By focusing your leadership team on this Rock, you turn a subjective negotiation into a technical demonstration of value. If the broker still refuses to look at the data, bypass them and present your regression analysis directly to the buyer's investment committee, who will appreciate the institutional-grade sophistication.