The buyer is using cheap public company comparables to drive down our valuation, but we are a highly specialized niche operator. How do we use IVS 105 guidelines to reject their relative valuation and anchor the negotiation on our intrinsic value?

Question

Tyler Smith · Accepted Answer

Buyers frequently try to use the Guideline Public Company Method to apply public market multiples to private businesses. However, this relative valuation approach is often inappropriate for highly specialized niche operators because true public comparables rarely exist, and public companies enjoy scale and liquidity advantages that do not translate directly.

Under IVS 105, you have the right to challenge the appropriateness of any valuation method based on the availability and reliability of comparable data. To reject the buyer's public comparables, take the following steps:

- Prove that the public companies selected by the buyer operate in different markets, have different customer dynamics, or do not share your automated operational efficiencies.
- Highlight the lack of direct comparability in size, growth rate, and capital structure, which invalidates a direct multiple comparison.
- Shift the focus to the Income Approach, utilizing either the Discounted Cash Flow method or the Capitalization of Earnings Method to establish your intrinsic value based on your unique domestic market share.

By demonstrating that your specific asset characteristics and market niche make public comparables unreliable, you force the buyer to value your business based on its actual cash-generating power rather than arbitrary public market trends.