For searchers looking at tech, cybersecurity, MSPs, IT services, etc., how are you thinking about the public market sell off in tech/IT services impacting your valuations? Is it reasonable to assume that sell off should put some downward pressure on valuations for small companies too? Curious what people think...
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
Having said that, there should be a correlation in this instance because the lower multiples for many of the higher-growth, higher-multiple public companies have been the result of higher interest rates (or expectations of higher interest rates). That relationship is economically straightforward and it also applies (perhaps even more) to private transactions. Higher rates decrease terminal values and lower IRRs through higher debt costs and higher overall opportunity costs. So multiples should be lower generically, particularly for companies that don't generate sufficient cash flows to pay out dividends to bring forward the payback period.