We want to use the Ankura regression-based valuation model to prove our premium value, but the buyer is ignoring our high return on equity and focusing solely on revenue growth. How do we negotiate the impact of capital efficiency on our enterprise value?

Question

Tyler Smith · Accepted Answer

Many buyers use simple revenue multiples because they are easy to calculate, but this ignores the true efficiency of your business. If you have high profitability and a strong return on equity, you must push back on simplistic growth metrics.

Use a regression-based model using public company data from sources like Capital IQ to benchmark your financial metrics. This quantitative approach shows how return on equity and profit margins influence enterprise value across your sector. When you plot your capital efficiency against peer companies, you can mathematically prove that your business generates more cash per dollar of capital than your competitors.

Present this data to the buyer during your negotiations. Show them that while your top-line growth rate may be moderate, your cash conversion cycle and asset productivity are exceptional. Under the IVS 105 framework, this means your future cash flows are far more secure and require less ongoing capital reinvestment.

Align this with your V/TO long-term goals. Prove that your high return on equity is a direct result of disciplined operational systems, not a temporary spike. By framing your capital efficiency as a core structural strength, you can successfully argue for a multiple that reflects your superior cash generation capacity.