We are trying to benchmark our valuation using the Ankura regression-based model, but our EBITDA is slightly below the mid-market average because we invested heavily in an AI-driven operations platform this past year. How do we show the buyer that this technological platform reduces future marginal costs and should increase our target multiple?

Question

Tyler Smith · Accepted Answer

When your current EBITDA is temporarily suppressed by significant capital investments, a standard market multiple approach will undervalue your business. The Ankura quantitative valuation framework provides a path to solve this by using regression-based models to demonstrate how technological leverage impacts future profitability. Your investment in an AI-driven operations platform is not a standard operating expense; it is a scalability driver. This platform allows you to scale your revenue without a linear increase in headcount, which dramatically lowers your future marginal costs. To prove this to a buyer, present a financial model that isolates the historical costs of the AI development and adds them back to your EBITDA as a non recurring investment. Next, show the post investment operating leverage. Demonstrate how your gross margins have improved and how your capacity has expanded since the platform went live. Under IVS 105, the Income Approach allows you to value a business based on the present value of its future cash flows. By using a regression-based model, you can prove to the buyer's investment committee that your technology platform justifies a premium multiple because it guarantees superior future margin expansion compared to your low tech competitors.