In the French transfer market, sellers’ expectations often exceed the price that buyers are willing to pay. Several recent analyses confirm that nearly half of transaction processes in France encounter a gap between the valuation desired by the seller and the final price. Assessing whether the value attributed to your business corresponds to market reality is not just about applying a sector multiple to an accounting result. The issue requires confronting your assumptions with concrete data and identifying the blind spots that distort the calculation.
Gap between valuation and sale price: what recent transactions reveal
Since 2023, the market multiples applied to the EBITDA or EBE of SMEs have remained generally stable. Sellers, however, have not adjusted their expectations at the same pace. The result: a persistent gap between the listed price and the amount actually signed during the sale.
This phenomenon can partly be explained by an anchoring bias. The manager values years of personal investment, local reputation, and the perceived quality of their client portfolio. The buyer, on the other hand, thinks in terms of future cash flows and operational risks. As detailed in articles from La Revue de l’Entreprise, the confrontation between these two perspectives forms the core of any sale negotiation.
To verify the realism of your price, the most reliable approach is to compare your valuation to actual transaction data in your sector, not just to theoretical benchmarks. Databases from specialized brokers publish ranges of multiples by sector and company size. If your target price is above the upper range without structural justification, the market will signal this to you through the absence of serious offers.
Recurring revenues and dependence on the manager: the two variables that multiples alone do not capture
Two companies showing the same EBE can sell for very different prices. The reason often lies in qualitative factors that standard multiples do not automatically weigh.
Revenue recurrence
The share of recurring revenues (multi-year contracts, subscriptions, maintenance under contract) directly alters the buyer’s perception of risk. A high recurrence stabilizes future cash flows and justifies a higher multiple. Conversely, a company whose revenue relies on one-off orders without client commitment will see its valuation adjusted downward, even with identical profitability on paper.
Documenting this recurrence is not limited to an Excel spreadsheet. The buyer will want to see the average contract duration, renewal rate, and client concentration. If you cannot provide this data, you leave the buyer to estimate the risk alone, and they will always estimate it higher than you.
Dependence on the manager
When the manager concentrates business relationships, the signing of quotes, and technical decisions, their departure represents a major operational risk for the buyer. The discount applied in this scenario can be significant. An organization where responsibilities are distributed, with documented processes and an autonomous team, reassures the buyer and protects the valuation.
Business valuation methods: cross-approaches to test your price
No valuation method produces a definitive figure. Each sheds light on a different facet of value, and it is their intersection that allows for a credible range to be identified.
- The asset-based method (corrected net asset) evaluates what the company actually owns after adjusting for assets and liabilities. It is suitable for structures with a strong real estate or industrial component but underestimates highly profitable service companies.
- The multiples method compares your result (EBE, EBITDA, net income) to those of similar companies recently sold. Its reliability depends on the quality of the chosen comparables: same sector, same size, same geographic area.
- The discounted cash flow (DCF) method projects your future cash flows and brings them back to a present value via a discount rate. It requires growth assumptions and a risk rate, two parameters that can significantly vary the result.
The cross-referencing of these three approaches delineates a realistic price zone. If the multiples method places you at one level and the DCF puts you significantly above, the gap deserves explanation, not neglect. Field feedback varies on the ideal weighting between methods, but most practitioners agree on one point: a valuation defended by a single method is fragile in negotiation.
Accounting adjustments and normalization: where valuation gaps hide
Gross accounting results almost never reflect the actual profitability as a buyer would calculate it. Adjustment (or normalization) involves correcting elements that distort the picture of economic performance.
Among the most frequently adjusted items:
- The manager’s compensation, often lower or higher than the salary an external manager would demand for the same role. The buyer recalculates the EBE by incorporating a market salary.
- Exceptional or non-recurring expenses (litigation, one-off work, personal expenses charged) that distort the average result over three to five fiscal years.
- Rent paid to a real estate company owned by the manager, often at a level that does not correspond to the local rental market.
- Unusual provisions or depreciation that artificially lower the result.
A rigorous adjustment can substantially alter a company’s value, either upwards or downwards. It is on the normalized EBE that the buyer will apply their multiple, not on the result as it appears in your annual accounts.
Preparing three years of adjusted accounts and a rolling twelve-month follow-up gives the seller a concrete advantage: the ability to control the financial narrative of their business instead of letting the buyer impose their own corrections. The difference between a suffered valuation and a defended valuation often lies in the quality of this accounting preparation.
