10 Proven M&A Valuation Methods for Unlisted Companies

Introduction

Valuing unlisted companies has always been more complex than evaluating publicly traded firms. Unlike listed companies, private businesses do not have readily available share prices, transparent disclosures, or consistent market benchmarks. As a result, investors, M&A teams, and wealth advisors rely on structured valuation frameworks to determine what an unlisted company is worth during mergers, acquisitions, fundraising rounds, and exit negotiations.

In today’s dealmaking environment—whether it is a strategic acquisition, a private equity buyout, or a stake purchase by HNIs—valuation is not about finding a single number. It is about building conviction using multiple methods. Each approach offers a different lens through which the business can be assessed, ranging from its financial fundamentals to market comparables to projected future cash flows.

Below is a detailed, Ultra-style breakdown of 10 widely accepted valuation methods used for unlisted companies in M&A scenarios, rewritten in a clean narrative format as per your request.

Comparable Company Analysis (CCA)

Comparable Company Analysis is one of the most widely used valuation approaches in M&A transactions. It benchmarks the target company against similar businesses that are publicly traded. These comparisons are made using financial multiples such as P/E, P/BV, EV/EBITDA, EV/Sales and others relevant to the industry.

For unlisted companies, CCA provides an objective market-driven frame of reference. The underlying assumption is simple: businesses operating in similar industries and with similar business models should trade at similar multiples. Analysts adjust for size, margins, scalability, growth potential, and risk. CCA is particularly helpful when the target lacks long historical financials but operates in a sector with listed peers.

Precedent Transaction Analysis (PTA)

Precedent Transaction Analysis uses actual acquisition or merger deals from the past to determine valuation. Instead of comparing listed peers, PTA compares the target with companies that were acquired in similar deals, ideally within the same industry and economic environment.

This method often results in higher valuation multiples because acquisition deals typically include control premiums. For unlisted companies, PTA becomes valuable when the sector has active M&A activity or when the target possesses strategic assets. By analyzing sale prices, deal structures, and valuation multiples paid in earlier transactions, investors can estimate what buyers may be willing to pay today.

Discounted Cash Flow (DCF)

DCF remains one of the most respected and intellectually rigorous valuation methods. It values a business by forecasting its future cash flows and discounting them to their present value using a suitable discount rate, often the Weighted Average Cost of Capital (WACC).

For unlisted companies, DCF is particularly effective when the business has predictable cash flows, strong revenue visibility, or subscription-based models. However, it also requires extensive financial modelling and transparent assumptions. Minor variations in growth rates, margins, or discount rates can change the valuation significantly. This method is commonly used by private equity investors, investment bankers, and valuation professionals during major M&A deals.

Asset-Based Valuation

Asset-based valuation focuses on the company’s underlying assets—tangible and intangible—rather than its earning potential. Analysts calculate the fair market value of assets and subtract the liabilities to arrive at the net asset value (NAV).

This approach is appropriate for companies with substantial physical assets, such as manufacturers, infrastructure businesses, real estate firms or NBFCs. For early-stage startups or service businesses with limited tangibles, asset-based valuation is rarely preferred. In M&A transactions involving distressed businesses, liquidation risks, or asset-heavy companies, this method becomes a crucial checkpoint.

Earnings Multiplier Method

The earnings multiplier method revolves around the company’s current earnings and applies a multiplier that reflects industry standards, growth prospects, and risk levels. Unlike the P/E ratio (which compares price to earnings), this method focuses on valuing the company based on a normalized earnings figure such as EBIT, EBITDA or net profit.

Investors often prefer this method when valuing unlisted companies with steady profits but limited transparency. Multipliers vary significantly by industry—tech firms command higher multiples due to scalability, while traditional businesses trade at lower ranges. This method delivers a straightforward and practical valuation, especially in negotiations involving promoters and private investors.

Book Value Method

The book value method is one of the simplest ways to value an unlisted company. It considers the value of assets recorded on the balance sheet after subtracting liabilities. While this method does not reflect true market worth or earning potential, it provides a conservative baseline.

In sectors where financial assets dominate the balance sheet—such as NBFCs, asset management entities or investment holding companies—book value becomes a more meaningful indicator. For M&A deals involving companies with minimal operations or those undergoing restructuring, book value is viewed as a realistic measure of downside value.

Liquidation Value Method

Liquidation value estimates what the business would generate if all its assets were sold today and liabilities paid off. This method is used in bankruptcy situations, turnaround scenarios or distressed M&A deals. It provides the floor value of the company.

For unlisted companies that struggle with debt or operational instability, liquidation valuation plays an important role during negotiations. Investors such as stressed-asset funds, special situation buyers or strategic acquirers use this method to assess the minimum recovery and identify whether revival is feasible.

Market Value Method

Market value method is straightforward for listed companies but more complex for unlisted ones. Since private companies lack a public market price, their market value is often estimated through informal trading activity, private placements, ESOP valuations, or investor negotiations.

In the unlisted ecosystem, shadow pricing created by investor demand plays an important role. M&A professionals evaluate recent equity transactions, institutional investment rounds, and secondary market trades to approximate a market-clearing price. This method becomes increasingly relevant as the private market in India expands and platforms like Ultra help investors discover opportunities in privately held companies.

Price-to-Earnings (P/E) Ratio Method

While technically a part of CCA, the P/E ratio method is often treated as a standalone valuation approach. It compares the company’s earnings with a P/E multiple drawn from listed peers, industry benchmarks or prior transactions.

For unlisted companies generating consistent profits, this method offers clarity and ease of comparison. It is most effective in mature industries where earnings are stable and margins predictable. M&A practitioners use P/E-based valuations to anchor discussions around promoter expectations and investor interest.

EV/EBITDA Multiple Method

EV/EBITDA is one of the most trusted valuation methods globally. It values a business based on its enterprise value relative to its EBITDA, removing distortions caused by debt levels, taxes, or accounting policies.

In M&A, EV/EBITDA levels the playing field across companies and is particularly useful when the target has varying levels of leverage. Investors prefer this method because it links valuation directly to operating performance. For unlisted companies in high-growth, capital-efficient sectors, EV/EBITDA multiples often serve as the primary basis for negotiation.

Why Multiple Valuation Methods Matter

No single method can accurately capture the true worth of an unlisted company. M&A professionals typically use a blend of valuation techniques depending on the company’s stage, industry, cash flows, and market environment. A diversified valuation framework helps avoid bias, builds confidence in negotiations, and protects investors from overpaying.

Where ultra Fits Into This Landscape

As India’s private markets mature, investors increasingly seek curated access to high-quality unlisted companies. ultra provides a research-driven, transparent ecosystem that enables investors to explore opportunities with better clarity. While valuation is just one part of the journey, understanding these frameworks helps investors make informed decisions when navigating private equity, pre-IPO opportunities, and alternative investments.

FAQs

1. Why is valuing unlisted companies more complex than listed ones?

Unlisted companies lack market-discovered prices and have limited disclosure, making valuation dependent on modelling, assumptions, and private benchmarks.

2. Which M&A valuation method is considered the most reliable?

No single method is perfect. A combination—typically DCF, EV/EBITDA multiples and precedent transactions—is widely used for accuracy.

3. Can valuation change significantly between funding rounds?

Yes. Market sentiment, company performance, sector multiples and investor demand can all influence valuation between rounds.

4. Are M&A valuations different from startup valuations?

Yes. Startup valuations often rely heavily on future potential, while M&A valuations balance fundamentals, financials and strategic value.

5. How does Ultra help investors exploring unlisted companies?

Ultra offers structured insights, curated opportunities and transparent information, helping investors navigate the complexities of private markets.