Valuation|
Valuation in the lower middle market: beyond the EBITDA multiple
Size, revenue quality, the working capital peg, earn-outs, seller notes and rollover equity often matter as much to sellers as the headline multiple.
Valuation Advisory
We prepare indicative valuation ranges that show what a business is likely to be worth to the buyers and investors who would actually pursue it. The work supports decisions about whether, when and how to transact; it is not a fairness opinion or an appraisal for tax or legal purposes.
When to engage us
- You are deciding whether to sell now, pursue a partial sale or continue operating, and need a grounded view of what each path is worth.
- An unsolicited offer has arrived and you want to know how it compares with what a competitive process might produce.
- Shareholders are discussing a buyout among themselves and need a market-based reference point to frame the negotiation.
- A board or corporate development team wants an independent view of a target’s value range before submitting an indication.
- You are planning for succession and want to understand how buyers would value the business today and what would change that view.
How we run it
What our valuation work is for
Owners and boards often need to know what a business is worth before they decide what to do with it. A credible range informs the decision to sell or wait, the response to an approach, the terms of a shareholder buyout and the price an acquirer should be prepared to pay. Our valuation advisory work is built for those decisions.
It is deliberately limited in scope. We do not issue fairness opinions, and our work is not an appraisal for tax, estate, financial reporting or litigation purposes. Where a formal appraisal is required, we can work alongside the credentialed appraiser your advisors engage.
How we reach a range
A valuation of a private company in the lower middle market rests on three questions: what the business really earns, what buyers have paid for comparable companies and what particular buyers could afford to pay given their own circumstances. We address each directly.
- We normalize earnings conservatively, distinguishing adjustments buyers routinely accept from those they will challenge.
- We use transaction and trading evidence with care, since multiples drawn from larger or differently positioned companies can mislead.
- We consider the specific buyer groups likely to be interested, because a strategic acquirer with clear synergies and a sponsor relying on leverage will reach different numbers.
Why a banker’s perspective differs
Our view of value is informed by buyer behavior in live processes: how acquirers in a segment are currently pricing risk, which characteristics are drawing premium interest and where buyers are applying discounts. That perspective tends to produce ranges that are both more realistic and more useful than a purely formula-based approach.
We are also explicit about structure. Two offers with the same headline value can deliver very different proceeds once earnouts, deferred payments and working capital adjustments are considered, and our analysis shows the difference.
What we deliver
Normalized earnings analysis
A restatement of historical earnings for owner compensation, non-recurring items and related-party arrangements, with each adjustment assessed for how buyers are likely to treat it.
Market reference points
Valuation evidence from comparable transactions and public companies, adjusted for size, growth, margins and the specific characteristics of private companies in your segment.
Buyer-type perspectives
Separate views of value from the standpoint of strategic acquirers, financial sponsors and family offices, reflecting differences in synergies, leverage capacity and return requirements.
Value driver and risk review
An assessment of the factors supporting a higher or lower outcome, such as recurring revenue, customer concentration or owner dependence, and how much each is likely to matter.
Structure and proceeds scenarios
Illustrations of how earnouts, seller notes, escrows and rollover equity affect what shareholders actually receive, compared with the headline value.
Valuation memorandum
A written summary of the range, methods and assumptions, reviewed with you in a working session so the conclusions can be tested and understood.
Timeline
- 1
Information and interviews
Weeks 1–2We collect financial statements, budgets and operating data and speak with the owner and senior managers about the business, its markets and its outlook.
- 2
Normalization and analysis
Weeks 2–3We normalize earnings, review the forecast and identify the characteristics buyers would focus on in diligence.
- 3
Market evidence and valuation
Weeks 3–4We apply transaction, trading and cash-flow approaches and reconcile them into a range, with a view of where the business is likely to fall within it.
- 4
Review and memorandum
Weeks 4–5We present the findings, discuss the assumptions with you and deliver the final memorandum, including the structure scenarios relevant to your situation.
Frequently asked questions
Is this a fairness opinion?
No. We do not provide fairness opinions. Our work is an indicative valuation range intended to support planning and decision-making by owners, boards and acquirers.
Can we use it for tax or estate purposes?
No. Tax, gift, estate and financial reporting valuations require a formal appraisal by a qualified appraiser. Our analysis can inform those discussions but cannot substitute for that work.
How precise is the range?
The range reflects genuine uncertainty about how buyers would assess the company. We explain which factors place the business toward the upper or lower end, which is often more useful than a single figure.
How long does a valuation take?
Typically four to five weeks from receipt of the information we request, depending on the complexity of the business and the state of its financial records.
Related insights
Valuation|
Earn-outs that work: structuring contingent consideration both sides can live with
Earn-outs can bridge a valuation gap, but only if the metric, measurement and operating covenants are defined before anyone needs them.
Sourcing|
Off-market sourcing: why the best acquisition targets are rarely for sale
Many of the best lower middle market acquisitions begin with an owner who was not selling. How direct, confidential outreach to owners works in practice.
Considering a sale, an acquisition or a recapitalization?
Conversations with Laurent Capital are confidential and carry no obligation. A senior member of the firm responds to every inquiry within one business day.