March madness has 68 teams vying for the National Championship in a single elimination tournament, with each team looking for game plan and strategy to win against their next opponent. There’s an element of “madness” to the decisions and pivots a company takes to rise above competitors and successfully implement strategies that were so carefully thought out and put in place. As a company owner or management team, understanding your industry and how you compare to others is critical in succeeding against your competitors.
I recently had the opportunity to work on a “Market Snapshot” project. A Market Snapshot Report is an analysis intended for the company’s management team and includes a robust search for comparable public companies and comparable transactions. The Report gives corporate management a better understanding of their industry and what multiples may be considered for their company. Market reports are especially useful for corporate strategic planning and navigating investment opportunities.
Not too long ago, I performed the market analysis for an online advertising company, primarily utilizing S&P Capital IQ and the Pratt’s Stats databases. In using these databases, there can be limitations to the available data depending on the size and nature of the business. However, even for relatively small and niche companies, understanding the greater industry still sheds light on the market position and is incredibly helpful in identifying the strategic opportunities available to the company.
As you can see below, the Market Snapshot generated and analyzed for this company included a list of relevant M&A transactions for the subject company and the online advertising company. According to the identified transactions, the trailing revenue multiples are between 0.41x – 2.26x, with the trailing EBITDA multiples between 5.26x – 10.00x. Given this data, we would expect companies within this industry to achieve multiplies within the 25th to 75th percentile.
During the process of negotiating the terms of a strategic exit, in raising capital, or in developing a partnership buy/sell agreement, the company is required to give a presentation, outline financial performance, understand the company’s market, and more. Both the information provided in the market snapshot report and our applied analysis give the company’s management team the tools and information they need to make the best strategic decisions and negotiations.