Understanding M&A valuation for private firms
Mergers and acquisitions (M&A) involving unlisted companies require specialized valuation approaches. Unlike listed firms, private companies lack market liquidity, transparent pricing, and widespread financial data, making valuation more art than science. For investors and acquirers, selecting the right methodology balances precision with practicality to establish fair value while capturing growth potential and risks. This guide explores the top 10 updated M&A valuation methods for unlisted companies in 2025, renowned for their investor-centric rigor and adapted for the latest market realities.
The top 10 valuation methods for unlisted companies
Quick valuation method comparison for investors
| Method | Best Suited For | Pros | Cons |
| DCF | Mature firms with predictable cash flows | Intrinsic, detailed valuation | Sensitive to assumptions, complex |
| CCA | Firms with listed comparable peers | Market-based, intuitive | Finding true comparables difficult |
| PTA | Active M&A sectors | Reflects real transaction values | Limited by availability of deals |
| Book Value | Asset-heavy or distressed firms | Conservative baseline | Does not capture earning potential |
| Revenue Multiple | High-growth or early-stage companies | Simple, captures sales value | Ignores profitability |
| P/E Ratio | Stable profit firms | Direct earnings focus | Earnings manipulation risk |
| EV/EBITDA Multiple | Operational profitability | Neutralizes capital structure bias | Less useful for asset-heavy firms |
| Market Value | Private firms with recent trades | Reflects investor sentiment | Informal, can be volatile |
| LBO | PE-backed acquisitions | Linked to financing & returns | Complex and deal-specific |
| Real Options | Uncertain, staged investments | Captures strategic value | Mathematical complexity |
Final words:
Investors and acquirers targeting unlisted companies must arm themselves with a nuanced understanding of diverse valuation methods to strike the right balance between opportunity and risk. Whether preparing for an acquisition or evaluating growth funding, selecting and combining the best-suited valuation approaches maximizes deal insight and outcome certainty. To unlock true value in private markets, start by engaging expert advisors and financial analysts fluent in these methodologies — put these top 10 M&A valuation tools to work for your investment success today.
FAQs:
- Why is valuing unlisted companies more challenging?
Lack of public price discovery, limited financial transparency, and illiquidity require use of multiple valuation approaches and adjustments for marketability and control.
- Which is the most reliable valuation method?
No single method fits all; DCF offers intrinsic value, but market-based comparables (CCA, PTA) bring real-world perspective. Best practice combines approaches.
- How do investors account for lack of liquidity in private firms?
Valuations often apply discounts for lack of marketability based on studies and transaction experience to adjust multiples derived from public comps or deals.
- When is asset-based valuation preferred?
In cases of asset-rich or turnaround companies with uncertain earnings, book value or adjusted NAV sets valuation floors.
- How are control premiums handled in M&A valuations?
PTA usually includes control premiums paid by buyers for majority stakes; these premiums are factored into deal pricing and comparison multiples.
- Can early-stage firms be valued using earnings multiples?
Typically not, due to volatility or lack of profits. Revenue multiples or venture capital methods are more appropriate.
- How important is the industry context in valuation?
Critical — multiples and growth assumptions vary widely by sector, maturity, and economic cycles. Industry benchmarks and peer groups matter.
- What role do synergies play?
Synergies can justify higher acquisition premiums in M&A but are highly deal-specific and discounted differently based on achievability.
- What financial data is crucial for accurate valuation?
Historical earnings, cash flow stability, growth projections, capital structure, asset quality, and market comparable form the foundation for sound valuation.
- Is an unlisted company’s valuation static post-transaction?
No, valuations evolve with business performance, market conditions, and subsequent fundraising or exit transactions. Continuous reassessment is vital