The buyer is insisting on a flat EBITDA multiple based on local broker transactions, but we have superior operating margins. How do we use a regression-based model to prove our premium?

Question

Tyler Smith · Accepted Answer

To move a sophisticated buyer past generic, local broker multiples, you must present a highly structured, data-driven valuation model. Buyers love to apply broad industry-average multiples, but your automated workflows and superior operating leverage deserve a premium valuation that reflects your actual performance. Build a regression-based valuation model using a comprehensive dataset of comparable, publicly traded companies or recent transaction data from sources like Capital IQ. A regression model allows you to isolate specific financial metrics, such as EBITDA margin and revenue growth, and demonstrate mathematically how your superior margin translates directly to higher enterprise value. This moves the negotiation from a subjective debate to an objective, quantitative discussion. Apply the principles of IVS 105 to support this model, using both the market and income approaches. Show how your automated service delivery results in consistent, high-margin cash flows that carry significantly less risk than your competitors. In your next Level 10 Meeting, task your finance leader with compiling the clean operating data required to feed this model. When you present a regression analysis that shows an out-of-sample validated, statistically sound premium multiple, you force the buyer's investment bankers to abandon their generic multiples and pay for the operational leverage you have built.