Can Unique Properties Command Unique Value? Marlin & Associates August Market Update

Aug 12, 2015

Can Unique Properties Command Unique Value? Marlin & Associates August Market Update

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We are not big on valuing companies based on “multiples” – be it a multiple of this year’s or last year’s revenue, EBITDA, net income, book value, or any other lone financial metric. The drivers of value are much more complicated than can be reflected by financial multiples. Sector growth rates, competitive positioning, management strength, scarcity value, strategic fit, expected future unit growth rates, profit expansion potential, and a host other factors have significant impact on enterprise value. Nevertheless, we were somewhat nonplussed to see the multiples paid for several recent transactions including McGraw-Hill’s purchase of SNL and Nikkei’s purchase of the Financial Times (an analysis of the McGraw-Hill/SNL transaction is here.) Wow. It is one thing to note that we now have 119 startups valued at more than $1 billion. It is quite another to see these high multiples applied to relatively mature businesses. Are we in a new “bubble”? We don’t think so. Since the beginning of time, very high prices have been paid by buyers with deep pockets for large, unique, strategically valuable properties. To us these were strategic buyers taking advantage of unique opportunities. But we are watching…

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