Overview
The Advanced Multiples section allows you to control which multiple is used in the Multiples valuation method. You can choose between three different sources, each offering a different level of customization and specificity for your valuation.
The multiple is a key input that directly affects your company's valuation using the Multiples method. Selecting the right source ensures your valuation reflects the most relevant market data or your specific knowledge about comparable transactions.
The Three Multiple Sources
1. Industry Average
Best for: Quick, research-backed valuations using established market data.
This option uses industry-wide EBITDA multiples sourced from Professor Aswath Damodaran at NYU Stern School of Business. These multiples are calculated annually from publicly traded companies across various industries worldwide.
How it works:
- Equidam automatically matches your company's industry classification to the corresponding Damodaran industry multiple
- The multiple is updated periodically to reflect current market conditions
- No additional input is required from you
When to use:
- When you want an objective, academically-sourced benchmark
- When you don't have specific comparable companies in mind
- For early-stage companies where direct comparables may be scarce
Example: If your company is classified in the "Software (Internet)" industry, the Industry Average will use Damodaran's calculated EBITDA multiple for that sector.
### 2. Public Companies
Best for: Detailed, customized peer analysis using specific comparable companies.
This option allows you to select specific publicly traded companies that you believe are most comparable to your business. The EBITDA multiple is calculated from the companies you select.
How it works:
1. Click on Public Companies to select this method
2. Use the search function to find comparable public companies
3. Add up to 30 companies to your comparables list
4. Choose an aggregation method:
- Median EBITDA: The middle value (recommended, less affected by outliers)
- Average EBITDA: The arithmetic mean of all selected companies
- Median Revenue: Based on revenue multiples instead
- Average Revenue: Average of revenue multiples
5. Save your selection
When to use:
- When you have specific companies that closely match your business model
- When you want more control over which companies influence your valuation
- For investor presentations where you need to justify your comparable selection
Tips for selecting comparables:
- Choose companies with similar business models, not just industry
- Consider companies at similar growth stages
- Include companies from different geographies if appropriate
- Aim for 5-15 comparables for a robust sample
3. Manual Entry
Best for: When you have specific knowledge about private transaction multiples or want complete control.
This option allows you to directly input a custom EBITDA multiple. This is useful when you have information about private transactions, recent M&A activity, or specific investor expectations that aren't reflected in public market data.
How it works:
1. Click on Manual Entry to select this method
2. Enter your desired EBITDA multiple in the input field
3. Optionally, add a justification explaining your reasoning
4. The value is automatically saved when you move away from the field
When to use:
- When you have knowledge of recent private transactions in your space
- When an investor or acquirer has indicated specific valuation expectations
- When public comparables don't accurately reflect your market segment
- For sensitivity analysis or scenario planning
Important notes:
- The value must be greater than 0
- Decimal values up to two places are supported (e.g., 12.5x)
- Document your reasoning in the justification field for future reference
How Multiple Selection Affects Your Valuation
The EBITDA multiple you select directly impacts the Multiples method valuation:
Multiples Valuation = EBITDA × EBITDA Multiple
For example, if your company has an EBITDA of $1,000,000:
- With an Industry Average multiple of 10.5x: Valuation = $10,500,000
- With a Public Companies multiple of 12.0x: Valuation = $12,000,000
- With a Manual Entry of 15.0x: Valuation = $15,000,000
The Multiples method is one of several valuation methods used by Equidam. Your final valuation is a weighted average of all active methods, so changing the EBITDA multiple will affect your overall valuation proportionally to the weight assigned to the Multiples method.
Frequently Asked Questions
Q: Which option should I choose?
A: It depends on your situation:
- Industry Average is ideal for most users who want a quick, objective baseline
- Public Companies is better when you have specific peers in mind or need to justify comparables to investors
- Manual Entry is best when you have private transaction data or specific requirements
Q: Can I switch between methods?
A: Yes, you can switch between methods at any time. Simply click on a different option and your valuation will update automatically. Your previous selections are preserved if you switch back.
Q: Where does the Industry Average data come from?
A: Industry Average multiples are sourced from Professor Aswath Damodaran at NYU Stern School of Business. Professor Damodaran is a leading authority on valuation and updates his industry data annually based on public company financials.
Q: How often is the public companies data updated?
**A:** The public company multiples are updated regularly to reflect current market data. The date of the last update is shown next to each company's multiple.
Q: What happens to my Manual Entry if I switch to another method?
A: Your manual entry value is preserved. If you switch back to Manual Entry, your previous value will still be there.
Q: Is the Manual Entry justification required?
A: No, the justification is optional. However, we recommend adding one for your records, especially if you'll be sharing the valuation with investors or stakeholders who may want to understand your reasoning.
Q: Can I see how my selection compares to other methods?
A: Yes, when you view the Advanced Multiples section, you can see the EBITDA multiple for all three sources at once, allowing you to compare before making your selection.