Evaluating a company’s value means translating a shifting economic reality into numbers. Depending on the method used, the result can vary from one to three times for the same company. The doctrine of the DGFiP, updated in June 2026, emphasizes a point often overlooked: no single valuation method should be used alone for unlisted securities. Combining several approaches and weighting them according to the specifics of the business remains the only way to obtain a realistic range.
Business Valuation Methods: What Each Approach Really Measures
The three main families of methods do not answer the same question. The asset-based approach evaluates what the company owns. The cash flow approach (DCF) estimates what it will generate. The multiples approach compares it to similar transactions.
| Method | What it Measures | Main Relevance | Major Limitation |
|---|---|---|---|
| Asset-based (corrected net asset) | Value of assets minus liabilities | Companies with a high real estate or industrial component | Ignores future profitability and intangible assets |
| DCF (discounted cash flows) | Future earning capacity | Growing companies, startups with reliable projections | Very sensitive to discount rate assumptions |
| Multiples (EBITDA, revenue) | Comparison with the market | SMEs and mid-sized companies in sectors with frequent transactions | Requires relevant comparables, which are often scarce |
A manager relying solely on sector multiples risks overvaluing their business if the benchmark transactions involve larger companies. According to an analysis by Dealsuite published in August 2026, larger companies always achieve a higher multiple than smaller ones, even in comparable sectors.
To delve into the gaps between theoretical valuation and actual sale price, the resources of La Revue de l’Entreprise detail several concrete cases of discrepancies between estimation and final negotiation.
Company Size and Valuation Multiples: An Underestimated Bias
Most valuation guides present multiples as a neutral tool. Applying a coefficient to EBITDA or revenue seems mechanical. The reality of the European M&A market tells a different story.
The Dealsuite report from August 2026 confirms that the valuation gap between European regions is gradually narrowing. However, economic size remains the determining factor in the level of multiples. An SME generating a few million in revenue cannot apply the ratios published for mid-sized companies or listed firms without significant adjustment.
Three elements explain this discrepancy:
- The liquidity of the transaction: a buyer of an SME has fewer financing options, which affects the price they can offer.
- Dependence on the manager: in small structures, the departure of the founder can significantly reduce perceived value.
- The depth of management: an autonomous team reassures the buyer and justifies a higher multiple, even with identical profitability.
Before selecting a multiple, it is essential to verify that the benchmark transactions involve companies of comparable size, sector, and maturity.
Discounted Cash Flows (DCF): The Most Powerful, Yet Most Dangerous Method
The DCF projects future cash flows and then discounts them to their present value using a discount rate. On paper, it is the most rigorous method. In practice, a slight variation in the discount rate dramatically alters the valuation.
The choice of rate incorporates the cost of capital, sector risk premium, and size premium. For an unlisted SME, this rate is significantly higher than for a large group, which mechanically compresses the valuation.
Growth Assumptions and Optimism Bias
The DCF relies on multi-year projections. A manager preparing for a sale will naturally tend to present favorable forecasts. The buyer, on the other hand, will apply their own scenarios, often more cautious.
The DGFiP has recommended since June 2026 to weight the DCF with at least one other method to limit the effect of unverifiable assumptions. An isolated DCF, no matter how sophisticated, does not constitute a complete valuation.
Business Valuation and Intangible Assets: The Real Blind Spot
The asset-based approach lists tangible assets: real estate, equipment, inventory, cash. It overlooks what often constitutes the real value of a service company or startup: the brand, patents, recurring contracts, technical know-how.
A client portfolio concentrated on two or three major accounts represents a risk that any buyer will quantify downward. Conversely, multi-year contracts with automatic renewal clauses constitute an intangible asset that secures the valuation.
- Patents and exclusive licenses create measurable barriers to entry.
- A documented information system and formalized processes reduce dependence on the manager.
- Revenue recurrence (subscriptions, framework contracts) stabilizes cash flow projections.
No single method captures these elements correctly. Crossing the asset-based approach, DCF, and multiples remains the only way to frame the valuation range with a minimum of rigor.
The final sale price will always depend on the negotiation between seller and buyer. Valuation is not the price; it sets the framework. What often sways a negotiation is an element that models do not capture: the quality of the existing team, the strength of business relationships, or simply the urgency of one of the parties.
