Bassem Mansour: Expert Insights on Private Equity Valuation Techniques
Residing in Hunting Valley, Ohio, Bassem Mansour is the co-CEO of Resilience Capital Partners, a Cleveland-based private equity firm known for its focus on American business services and manufacturing companies. With a background in psychology from the University of Dayton and an MBA in finance from Case Western Reserve University, Bassem Mansour has built extensive expertise in investment banking, reorganizations, and leveraged buyouts. Through his work in private equity, he has gained a deep understanding of valuation methodologies essential to the industry. His professional leadership and involvement in organizations such as the Association for Corporate Growth and the Young Presidents Organization reflect his active role in shaping best practices for assessing business value in the private equity sector.
Private Equity Valuation Techniques
Valuation is an extremely important element of private equity (PE) investing. Unlike most traded companies that operate in markets where value is determined by stock price, private companies usually do not have a universal market valuation benchmark. This often makes valuation an effort that requires balancing between industry insights, professional judgment, and financial modeling. For private equity firms, accurate valuation is instrumental to identifying investment opportunities, maintaining investor confidence, negotiating exits, and assessing portfolio performance.
Comparable company analysis (CCA) or trading multiples is a common equity valuation technique. It identifies publicly traded companies that are similar to the target private company in terms of its industry, size, profitability, and growth prospects. Analysts then examine key valuation ratios like EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization), P/E (price-to-earnings), and EV/sales to determine how the market values similar businesses. After analysts have established a range of multiples, these figures are usually applied to the target company’s financial metric to estimate its implied enterprise value or equity value.
This technique is particularly useful when there are several publicly traded peers and when market conditions are stable. However, this approach does not fully capture private company characteristics like management quality, risk concentration, and limited liquidity because it relies heavily on public data. Analysts often have to adjust the multiples to reflect these private company factors to ensure a more realistic valuation.
Precedent transaction analysis (PTA) is another important valuation technique. It examines valuation from past mergers and acquisitions involving similar companies. This method is usually helpful when valuing companies that are about to be subject to acquisition because it reflects the premiums that previous buyers have paid for strategic positioning and control. Analysts collect data on previous transactions, typically within the same sector, and they calculate relevant multiples like price/book value, EV/EBITDA, or EV/revenue. They then use these transaction multiples to target the company’s metrics to estimate a likely valuation range.
The discounted cash flow (DCF) method stands out as one of the most reliable ways to determine a company’s worth. It measures a business’s intrinsic value by estimating the future cash it will generate and converting those sums into their present value using a discount rate, often based on the company’s weighted average cost of capital (WACC). This approach looks beyond current market trends and focuses instead on how well a company can create value over time.
Because the DCF method depends heavily on assumptions about growth, margins, expenses, and discount rates, even small changes in these inputs can lead to major differences in valuation. To manage this uncertainty, private equity professionals often use sensitivity analyses and scenario modeling to explore a range of possible outcomes. These tools help them test how different financial and operational conditions could affect future cash flows, ensuring that the final valuation reflects a balanced and realistic view of potential performance.
In some cases, analysts rely on the net asset value (NAV) or book value approach, particularly for asset-heavy businesses or investment holding companies. This technique measures value by calculating the difference between a company’s total assets and its liabilities. It is also common in private equity fund reporting, where managers assess each portfolio company’s value to determine the overall NAV of the fund. While this method provides a clear picture of tangible worth, it may overlook intangible assets such as brand reputation, intellectual property, or growth opportunities.
About Bassem Mansour
Based in Hunting Valley, Ohio, Bassem Mansour is the co-chief executive officer of Resilience Capital Partners, a private equity firm in Cleveland. He holds a psychology degree from the University of Dayton and an MBA in finance from Case Western Reserve University. Mr. Mansour has extensive experience in private equity, distressed investing, and corporate restructuring, and he serves on several boards, including the Museum of Contemporary Art Cleveland and the Western Reserve Land Conservancy.