In the webinar on “Transaction Databases” last week from Valuation Products and Services and the Financial Consulting Group, attendees took an informal poll to find out who used which databases (they could check off more than one). The results:
The more transactions you have, the better, according to co-presenters Jim Hitchner and Sam Wessinger. If you have just a few individual transactions and don’t know much about them, you may not want to use them in a primary valuation method but as corroborating evidence. On the other hand, if you’re valuing a larger business, have good transactions, know a lot about them (typically from public company buyer source documents), and checked the information in SEC filings to calculate your own valuation multiples, then you should feel more comfortable using them as a primary valuation method. And if you’re valuing a small business (using the DMDM method—Direct Market Data Method developed by the IBA) with enough transactions in a pool to develop a market, then pick a multiple in the spectrum and use this as a primary method.
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