Fair Valuation for Off-Market Acquisition?

Valuations for off-market and on-market acquisitions are generally similar, as they’re based on industry averages within specific subsectors. The main advantage of buying off-market is the potential to secure a better price. Often, sellers will have already obtained valuations from firms like Stout, Duff & Phelps, or Houlihan Lokey, based on average market multiples. Additionally, once a deal is close to finalizing, most banks will require their own valuation report to support financing. Market averages are readily available in most sectors, even for niche areas. For off-market acquisitions, an inexperienced seller can sometimes present a unique opportunity, as they may lack a clear understanding of current market standards. Brokers often play a crucial role in aligning a seller’s expectations with the market, helping them understand if their initial off-market valuations are unrealistic. Without broker fees, which typically range from 5-10%, buyers and sellers can benefit from substantial savings on the transaction. However, brokers add value by navigating complex deals and negotiating advantageous terms—particularly in transactions involving property or highly specific niches—which can sometimes justify their cost.

Industry avg is the best gauge also look at BVR for ratios and comps and learn the business from services to manufacturing.