Business Valuation in an M&A context: A comparison between market multiples and intrinsic methods

This thesis examines business valuation in the context of mergers and acquisitions (M&A), with a specific focus on comparing intrinsic valuation methods and relative approaches based on market multiples. While both frameworks are widely applied in corporate finance, they can lead to divergent outcomes depending on assumptions, peer selection, and the role of post-acquisition synergies. The empirical analysis is conducted on a real but anonymized case: the 2019 acquisition of Beta Machinery by Alpha Group in the machinery sector. An ex-post Discounted Cash Flow (DCF) model is reconstructed using realized post-acquisition cash flows, while a text-based Comparable Company Analysis (CCA) is employed to refine peer selection and improve the robustness of multiples. Both approaches produce enterprise values above €200 million, compared with the €150 million price actually paid. This discrepancy highlights how ex-post valuations embed integration benefits, whereas the negotiated price reflected the stand-alone fundamentals of the target, adjusted for size and illiquidity. The study then shifts from valuation to investment analysis, evaluating the financial returns for both acquirer and sellers. Results indicate that Alpha Group achieved a positive net present value, mainly driven by operating synergies, while the sellers realized a negative return when measured against the value of the shares received. An alternative hybrid approach, combining ex-post DCF with market multiples, is also proposed to reconcile intrinsic and relative perspectives. Overall, the thesis contributes to the academic debate on business valuation by emphasizing the importance of distinguishing between pre-deal stand-alone value and post-deal integrated value, and by showing how bargaining power and methodological choices critically influence M&A pricing.