BVR-supported research examines small-firm M&A valuations

BVWireIssue #251-4
August 23, 2023

M&A valuations
private company comps, private company transaction data, guideline transaction method, dealstats

Using the DealStats database, M&A advisor Ray Johnson (Exit Experts) conducted a study to examine how various financial factors influence acquisition valuations for small businesses. The study was for Johnson’s dissertation for his doctorate degree in business at the University of Florida. Congratulations, Ray!

New ground: The study uses a definition of small business not used in previous studies, namely the Small Business Administration’s size standards. The study was also able to examine the importance of adjusted EBITDA in small-firm valuation. Previously unavailable, data on adjusted EBITDA has been included in the DealStats database since May 2017. The findings also highlight the significance of certain other measures, such as net sales, gross profit margin, and growth. The paper also points to future research that can be done, using this study’s findings as the foundation.

In the paper’s acknowledgments, Johnson says he is “profoundly grateful” to BVR’s Adam Manson, chief data officer, for his support and assistance with the study. This is not the first time BVR has lent its support to scholarly research, and we are always happy to become involved in projects that will be of benefit to the profession. Maybe you have something in mind?

More details of the paper’s findings, as well as some commentary by Johnson, will be in a future issue of Business Valuation Update. Also, once the paper is publicly available, we will let you know.

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