“Two years ago, 9-10 multiples were ordinary. But now it is much more difficult to see these, because companies no longer have the profits to justify these multiples. The margin was and continues to be between 5 and 10xEBITDA [earnings before interest, taxes, depreciation, and amortization], but the share of transactions which take place at the lower limit is higher now,” Matei Paun, Managing Partner of BAC Investment Bank, a financial advisory company for mergers and acquisitions, told Business Standard.
Radu Georgescu, the businessman who controls the Gecad group, believes that the modification of assessment models leads to losses of the measurement unit in the IT business. “Multiples were previously set depending on equivalent transactions, quotations of equivalent companies on the stock exchange, patents were valued, and there were some instruments. At present, everything is a mess and one does not know what to valuate. In the end, a company’s shares are like money. The moment their value is unclear, this is extremely serious,” added Georgescu.
The representative of the Intel Capital investment fund said that the intrinsic value of a business is very important and that the value of a company is given by its capacity to generate a profit. From this point of view, the market now favors investors, as their negotiation power increased because there are many companies in desperate need of capital.
