Business appraisers report increases in the number of engagements, fees for services, competition, and improved general business conditions over the last 12 months, according to the “2017 Private Capital Markets Report” from Pepperdine University Graziadio School of Business and Management. The survey of 131 business appraisers also finds that government regulations and taxes are the most important issues facing privately held business today. The appraisers also expect slightly worsening business conditions in the next 12 months. Other key findings include:
- The most popular methods used by respondents for valuing a business were discounted future earnings method (33%), capitalization of earnings method (25%), and guideline company transactions method (17%). Only 10% use the guideline public company method.
- Recast (adjusted) EBITDA multiple is the most popular when using the multiple valuation method.
- Respondents use an average risk-free rate of 3.16% and a market (equity) risk premium of 6.14%.
- Average long-term terminal growth is estimated at 3.28%.
The survey also presents cost of capital data for each major capital type and its segments. Respondents include lenders, private equity groups, venture capital firms, angel investors, privately held businesses, investment bankers, business brokers, limited partners, and business appraisers.
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