We use extremely robust Methodology, consulting a variety of sources and cross checking them against extensive corroborating evidence for every transaction.
In creating BVB Insights: Data and Analysis on UK Private Company Multiples 2018, we used:
- Zephyr - Bureau van Dijk for informaiton on completed deals (for completed date, target and buyersnames)
- IbisWorld and specialist industry bodies for industry information
- Companies House for company accounts
- Securities and Exchange Commission - EDGAR filings for US acquirer company accounts
- Publicly available information where available, such as annual reports, press releases, articles in the financial press
In BVB Insights, we use multiples of enterprise value, not share value. Enterprise value multiples reflect the value acquirers pay for the business, independent of financing structure. Because every business adopts a different financing structure, this approach gives you a truer picture of the value of a business.
Where consideration is deferred (i.e. payable within one to two years of the transaction date) and not contingent upon factors such as financial growth targets, the deferred consideration has been included in the EV.
However, our EV calculations exclude consideration contingent upon future events because publicly available information does not provide a reliable picture of a company's future.
Robust and reliable data
In calculating the EV for each transaction, we source the most reliable evidence of the price paid. Where possible, we also cross-check it with other sources of information such as press releases and annual accounts.
The EBITDA of each target company is normalised by adjusting the earnings before interest and taxes given in the company's most recent financial statements at the date of the transaction. We adjust for:
- Depreciation and amortisation expenses
- Gain or loss incurred on the disposal of assets
- Profit or loss on discontinued operations
- Impairment costs
- Share-based payments
- Exceptional items
Sometimes, acquirers provide their own calculation of normalised EBITDA for the target company, which may be more current than that shown in the latest financial statements. In such instances we use the acquirer’s calculated normalised EBITDA in our EV/EBITDA calculation.
The figure for revenue is sourced from the target company’s most recent financial statements as at the transaction date.
The revenue used in the EV/revenue calculation is the normalised revenue of the target company.
To calculate normalised revenue, we take the revenue from the target company’s most recent financial statements at the transaction date. We also review and analyse previous years' financial statements and adjust for the following:
- Revenue from discontinued operations
- Non-recurring revenue items (e.g. government incentives, rebates)
- Other factors, where identified
Some acquirers provide their own calculated normalised revenue for the target company, which may be more current than that shown in the latest financial statements we have sourced from Companies House. In such instances we have used the acquirer’s calculated normalised sales in our EV/revenue calculation.