The buy-side deal team is relying solely on recent local market comps to price our niche industrial business, but those local transactions are outdated and unrepresentative. How do we use the Income Approach under IVS 105 to force a realistic valuation?

Question

Tyler Smith · Accepted Answer

Relying on local market comparables for a highly specialized, niche business is a recipe for a lowball offer. If the local transactions the buyer points to are outdated, small, or operationally distinct, those comps are functionally irrelevant. You must force the buyer to evaluate your business based on its unique cash-generating capacity.

Under the IVS 105 framework, you have the right to challenge the market approach and insist on the Income Approach. This method values your company based on the present value of its future cash flows. To do this effectively, present a detailed, five-year financial forecast that is fully aligned with your V/TO®. Show the buyer exactly how your specialized machinery and proprietary processes translate into highly predictable, long-term free cash flow.

Support your income projections with your historical operational metrics, demonstrating that your margins are highly stable and insulated from local competitive pressures. By shifting the valuation methodology to the Income Approach, you force the buyer to price your business on its actual forward-looking earnings power rather than the distressed sales of unrelated local companies.