We want to use a regression-based valuation model with public market data to defend our premium multiple, but the buyer's investment banker claims our smaller scale makes public company benchmarks completely irrelevant. How do we apply this methodology under IVS 105 to prove our value?

Question

Tyler Smith · Accepted Answer

The buyer's banker is using scale as a weapon to force you into a lower multiple bucket. To fight back, you must use a quantitative, regression-based model that explicitly controls for size, growth, and profitability. Under IVS 105, the Market Approach allows for adjustments to comparable transactions to account for differences in scale, provided the adjustments are based on reliable market data.

Start by gathering a robust dataset of publicly listed companies in your sector from databases like Capital IQ. Instead of just looking at the median multiple, build a regression model that plots enterprise value against key metrics such as EBITDA margin, revenue growth, and capital efficiency. This model will show a clear trend line of how the market values these financial attributes.

Next, calculate where your business falls on that trend line. If your automated operations yield margins and growth rates that sit in the top quartile of the industry, your regression model will demonstrate that your company operates with the efficiency of a larger public player. This quantitative proof allows you to argue that your superior financial performance offsets your smaller absolute scale.

Present this regression analysis as a formal valuation exhibit. Under IVS 105, you are demonstrating a systematic, data-driven approach to valuation that moves beyond subjective broker estimates. This forces the buyer's banker to argue against mathematics rather than just throwing out a generic small-business discount.