Direct approach

The direct approach (or market approach) in business valuation determines value by reference to observable market prices from listed company multiples or transaction multiples, applied to the target company's normalised financial aggregates. It is one of the three core valuation families alongside the income approach (DCF) and the asset-based approach. The direct approach anchors valuation in current market reality, directly reflecting what investors are paying for comparable businesses. Its reliability depends critically on the quality and relevance of the selected comparables — sector similarity, size, geography and margin profile are the key selection criteria.

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Example: to value a Swiss precision engineering company, Hectelion applies the direct approach using 7 listed comparable companies (median EV/EBITDA: 7.2x) and 5 recent sector transactions (median EV/EBITDA: 8.1x). Applied to a normalised EBITDA of CHF 3.5 million, the method yields a value range of CHF 25.2–28.4 million — triangulated against the DCF output of CHF 26.8 million to confirm the valuation conclusion.

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At Hectelion, the direct approach is systematically used as a market anchor in all valuations, combined with DCF for triangulation.