Step 1: Basis Multiple

The Basis Multiple is based on the idea that the value of a company is considerably influenced by the general „attitude“ on the market. Put simply, this means: If the general market sentiment is positive, valuations tend to be higher compared to times of bleak economic perspectives. A measurement of this sentiment is certainly possible, as shown by the example of the IFO-Index. The latter represents one of the 10 influencing factors (grey background) that ultimately determine the Basis Multiple. Apart from the IFOIndex, mainly key figures from the M&A-market, the market for company mergers and acquisitions, are employed.

Simplified version of current Basis Multiple, determined by Aquin:

Step 2: Sales Volume

The increasing size of a company has a positive effect on its value. Especially because the risk profile tends to decrease with growing size. Because theoretically: the larger the company, the greater is its independence from individual customers, employees or target markets. Furthermore, the professionalization of the organization increases with the size of the company.

Step 3: Sales growth

Positive growth rates in sales indicate increased cash flow surpluses in future periods – the opposite applies to negative rates. However, caution is required; a sustainable and expected change in growth (adjusted for special effects) for the forthcoming (2-3) periods should apply.

Step 4: Relative Strength

The relative position of the company compared to competitors as well as the attractiveness or rather robustness of the target markets has a significant influence on the company value. The aim is to identify valuation-relevant strengths/risks and to include them in the calculation.

Company:
The more questions are answered with „yes“, the further right the placement on the horizontal axis

1) There are no cluster risks or rather dependencies on customers/suppliers?
2) Revenues have remained (largely) consistent in years of crisis?
3) Are there effective mechanisms to keep competitors at a distance?

Step 4: Relative Strength

The relative position of the company compared to competitors as well as the attractiveness or rather robustness of the target markets has a significant influence on the company value. The aim is to identify valuation-relevant strengths/risks and to include them in the calculation.

Market:
The more questions are answered with „yes“, the further top the placement on the vertical axis

1) Is the average growth of the market above the rate of inflation?
2) Does the target market remain (largely) stable during crisis years (i.e. pharma)?
3) Are there effective barriers (such as approvals, patents), which complicate market entry?