University of Twente Student Theses


Multiple Valuation For SMEs In The Netherlands: A Case Study On The Brookz Overname Barometer Multiple

Carelse, T.C. (2023) Multiple Valuation For SMEs In The Netherlands: A Case Study On The Brookz Overname Barometer Multiple.

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Abstract:Publicly available multiples for valuating SMEs in the Netherlands are widely used among business valuators. Until now, no research has been conducted on how these multiples are created, what their accuracy is, and how they should be used. This paper researches to what extent publicly available multiples in the Netherlands for SMEs can be used. It attempts to create a bridge between the academic literature written on listed companies to SMEs. The research measures the accuracy of the Brookz Overname Barometer (BOB) multiple based on 28 transactions. It additionally provides suggestions on how the accuracy of the BOB multiple can be increased. In the research, a total of six business valuators are interviewed and 119 business valuators took part in an online survey. The results of the research show that important concepts of BOB are undefined. The results of the survey show that the users suppose they know the concepts used in the BOB. However, this is in contrast with the latter answers of the users on definitions used in the BOB. The results show that the users have different interpretations of the concepts. This includes important concepts like which EBITDA should be used and whether the valuation is including an earn-out. This accuracy of the BOB multiple is worse when compared to previous research conducted on the accuracy of listed firms. The paper measures the accuracy of the BOB multiple with four different scenarios for two multiples. When using a oneyear EBTIDA the BOB multiple has an accuracy between 18-25%. Whenever a three-year average EBITDA is used, the BOB multiple shows an accuracy between 32-36%. The paper suggeststhat a threeyear average EBITDA should be used. The accuracy of the BOB multiple can be increased if the number of industries is increased, a revenue variable is added, and the free cash flow (FCF) multiple is used. The results show that the BOB multiple should only be used as a sanity check. Although the FCF multiple would increase the accuracy, this paper suggests using the earnings before interest, depreciation, and amortisation (EBITDA) multiple. This is to make use of a different value driver than the discounted cash flow (DCF) method makes use of, and that simplicity is preferred by the users.
Item Type:Essay (Master)
KroeseWevers, Enschede, Netherlands
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
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