P:e ratio discounts for private company valuations

P:e ratio discounts for private company valuations

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I have seen several articles concerning the diminishing of such discounts, indeed BDO Stoy Haywards Private Company Price Index suggests the discount has now vanished. What is other peoples opinion on this? If it has for larger such transactions, what constitutes larger, are we talking double digit millions, or just a million or two?
Tim Vogel

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By martinfoley07
07th Mar 2007 23:41

Tim, with respect...
... your question as posed is unintelligble (well, to me anyway, and I have valued n businesses from £1 to over $2 billion).

I can make a guess (in fact several guesses) as to what you maybe have in mind, but suspect you are mixing up all sorts of issues.

For central example, you refer to empirical indices then ask for peoples opinions !! Are you raising a question about lies, damned lies and statistics?

Do you wish to have a crack at expanding on what is giving you a problem, and the circumstances?

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By martinfoley07
08th Mar 2007 14:45

any number of factors
will affect the view.
Using one quarter's empirical evidence would likely be a very poor idea.

Take care over the deals being anaysed (as you say).
If your deal size is outside the range of deals being analysed, then the evidence is of less use, and may be of no use at all.

As always, try to ensure you are comparing apples with apples (or near apples) when using any benchmarks.
For example, is the table you refer to comparing whole private company deal prices with listed company share price on per share basis or on a whole company deal basis (ie including bid premium if any).

So I would not get sucked in to too much concern over this. Frankly, when looking at "micro-deal" pricing (certainly under say £1 million) I would personally virtually ignore public company P/Es altogether.

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