Zweig Group recently released its 2017 Valuation Survey — a staple of industry-leading firms for more than 25 years. When it comes to estimating the value of a business enterprise, it is important to understand exactly what is being valued and for what purpose. Without an established market in which a firm’s shares are actively traded, an appraiser can only estimate the market value through the application of pertinent measures and indicators of value from relevant data.

This is why this survey and the corresponding report are so valuable to the industry as a whole. This compilation of data is intended to provide some benchmarks and metrics that allow firms to see how their own value ratios stack up against industry norms.

Zweig Group calculates six value ratios that determine the Z-value formulas. These statistically derived Z-values may facilitate comparisons between firms and between multiple valuations of the same firm. Raw Z-values can be adjusted upward or downward, taking into account the effects of these variables as indicated by the survey results. For instance, in relation to a firm’s net service revenue, the average valuation performed on behalf of the majority or controlling ownership resulted in values 30 percent greater than valuations performed on behalf of the minority or non-controlling owners.

In general, valuations conducted for external purposes, such as a possible merger or sale, tend to yield higher value ratios than those conducted for internal use (buy/sell agreements between stockholders, internal ownership transfer, etc.). Valuations performed in connection with a potential or actual sale or merger resulted in higher median values for all six value ratios.

Younger firms, founded after the year 2000, were valued higher from a value-to-net-service-revenue perspective. This is likely because these firms were growing at a high rate and were also projected to continue to grow revenue, EBITDA, profit, and backlog faster than more mature firms during the next few years.

Historically, we have found that, with some exceptions, larger firms were generally valued higher from a value-to-EBITDA-ratio standpoint than smaller firms. This indicates that as firm size grows, so does the relative value of the underlying assets or equity of the firm — growth is good! Conversely, from an equity-value-to-book-value perspective, larger firms had a lower multiple, likely because larger firms were carrying more underlying assets and owner equity than smaller firms.

Over the years, Zweig Group’s Valuation Survey has provided CPAs, financial practitioners, and AEC firm leaders with the tools to properly value ownership stakes in architecture, engineering, and environmental consulting firms for almost any reason. Whether there is an internal ownership transition, M&A activity, or some other happening, the data in Zweig Group’s Valuation Survey provide reasonable market estimates of firm value based on six value ratios.

The 2017 Valuation Survey report and Excel working file are available for purchase at

Will Swearingen is director of Research. He can be contacted at

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