What is the current rule of thumb for estimating purchase price of a company times earnings? (i.e. $10 mil in rev = $30 mil estimated purchase > 1:

November 19, 2007

Posted by TonyLiu

( 2 ratings )

Your answer depends on to the type of company you are talking about. Can you provide more details on the company's industry?

Below I have pasted links to two pdfs which show multiples from a private transaction database. You can apply the multiples to your business to get an idea of what you would be worth based on comparable companies

Inc Valuation guide: http://www.inc.com/magazine/20070101/features-valuationguide.html
Valuation. Chart: http://images.inc.com/magazine/20070101/valuation-chart.pdf
Valuation Tables: http://images.inc.com/magazine/20070101/valuation-tables.pdf

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November 19, 2007

Posted by Chivy

( 1 rating )

I don´t know if this is what you are looking for, but if you want to estimate the purchase price of a company you´ve got to calculate the present value of expected cash flows within the forecast period plus a value below which represents liquidity funds after that period, using the discount rate that best suits the industry risk.
There are also relative valuation models which determine the value of a company based on the value of a similar company (for example price-earnings ratios).
If this wasn´t what you were looking for, sorry; if it was and you are interested we can keep in touch

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