Our investment banker is pushing us to market based on guideline public company transactions, but we are a private mid-market business with very different capital constraints. How do we reconcile public multiples with mid-market reality to set a realistic but aggressive target valuation?

Question

Tyler Smith · Accepted Answer

Investment bankers love to show off complex valuation models using public market multiples, but public companies operate in a different reality. They have access to cheap capital, highly liquid stock, and massive scale. Applying those multiples directly to a mid-market private business is unrealistic and can lead to unmet expectations. To set a target valuation that actually closes deals, you must reconcile these valuation methods with private market reality. Use the guideline public company transactions as a starting point, but apply a realistic size and illiquidity discount. Next, focus on the guideline transaction method, which looks at actual acquisitions of private companies in your sector. This provides a more accurate baseline of what buyers are actually paying. To justify a premium above this private baseline, point to your operational metrics. Show how your systemized operating model delivers superior margins and faster growth than your peers. Use your EOS® structure as proof of a self-managing, low-risk business. If your EBITDA per employee is double the industry average, that operational leverage justifies a premium multiple. By balancing public market data with private market reality and proving your operational superiority, you can establish a target valuation that is both aggressive and achievable.