Company Valuation

Part
01
of two
Part
01

PropTech Valuation Multipliers

Several EBITDA multiples have been identified. All identified multipliers are very similar, ranging from 19.93 to 21.1. The multiple identified by GCA might be the most relevant, because it analyzes the specific segment of the PropTech industry in which Dwell Kept is operating in.

Property Management Software — EBITDA Multiple

  • GCA, a PropTech consulting company, publishes a quarterly report on mergers and acquisitions (M&A) deals in the PropTech industry. Out of the available industry segments in the report, Dwell Kept and other players like Hello Alfred and Livly are best aligned with the property management software industry segment.
  • The most recent report estimated (by analyzing 42 recent transactions) that the median EBITDA multiple in the property management software industry segment is at 21.1.

Real Estate Technology (PropTech) — EBITDA Multiple 1

  • The investment bank Raymond James & Associates found in its report that the 2018 EBITDA multiple for the real estate technology (PropTech) industry was at 20.6.

Real Estate Technology (PropTech) — EBITDA Multiple 2

  • Finally, from a different perspective, the Corum Group prepared a report on M&A transactions in the technology industry. Real estate technology was one of the analyzed segments in the report.
  • The Corum Group's analysis found that the median EBITDA multiple for the real estate technology segment of the technology industry was at 19.93 in 2018.

Conversion From Public to Private Transactions

  • PropTech is a new and rapidly developing sector, which is why sufficient data on private transactions in the sector still do not exist. None of the direct competitors to Dwell Kept like Hello Alfred, Livly, and Equiem have been acquired, and the only available data is for public company transactions.
  • An article published by the Financial Times in 2018 found that "investors paid on average 12.5 times [EBITDA] multiples for private companies", compared to "16.8 times multiples paid for public companies." This means that multiples for all private companies were 25.6% lower (1 - 12.5 / 16.8 = 25.59) than for public companies, regardless of industry. This information could be relevant for determining the valuation for a private company.
Part
02
of two
Part
02

PropTech Valuation - Comparable Analysis

Using the EBITDA multiples for other transactions in the PropTech industry, the valuation of Dwell Kept is estimated to be $49,457,540 after two years of operations. Even though valuation figures arrived through comparable analysis should be treated as estimates, multiple sources indicate that EBITDA multiples in the PropTech industry are at about 20.5.

Average EBITDA Multiple

  • Since all identified multiples are rather similar, taking the average of the three identified EBITDA multiples will probably be the best approach.
  • The average EBITDA multiple for the PropTech industry is 20.54 ((19.93 + 20.6 + 21.1)/3 = 20.54).

Discounting to Match Private Company Valuation

  • All of the identified multiples were estimated by analyzing data from public company transactions because PropTech is still a new and rapidly developing sector.
  • According to an article published by the Financial Times in 2018 "investors paid on average 12.5 times [EBITDA] multiples for private companies", compared to "16.8 times multiples paid for public companies." This means that multiples for all private companies were 25.6% lower (1 - 12.5 / 16.8 = 25.59) than for public companies, regardless of industry.
  • Applying that discounting factor to the previously calculated EBITDA multiple, we get an EBITDA multiple for private PropTech companies of 15.28 (20.54 * (1 - 0.2559) = 15.28).

Dwell Kept — EBITDA Multiple Valuation

  • Dwell Kept is projected to earn an EBITDA of $3,236,750 in its second year of operation.
  • Using the previously calculated EBITDA multiple for Private PropTech companies of 15.28, the estimated valuation of Dwell Kept after two years of operations is $49,457,540 ($3,236,750 * 15.28 = $49,457,540).
Sources
Sources