Standalone value
Valuation & CompsWhat a business is worth run as it is, by its current owners, before any acquirer's synergies or plans are added to it.
Also written: stand alone value, standalone basis
Standalone value is the reference point every deal conversation needs and few of them state. It is what the business generates on its own trajectory, valued on its own risk, with no assumption that anybody buys it or changes it.
Trading comparables and a DCF both aim at it, from different directions: one asks what the market pays for businesses like this, the other what this business will produce. Where the two agree, you have a standalone range supported by an independent second route, which is worth far more than either on its own.
Precedent transactions do not aim at it. A transaction multiple contains control and whatever share of the buyer's synergies the seller managed to extract in the negotiation, so it prices the business under a particular owner rather than as it stands. That is not a flaw in the method, but it does mean a precedent multiple applied to a company with no such buyer available is pricing synergies that do not exist.
The distinction drives real decisions. A board deciding whether to accept an offer compares it with standalone value plus the risk of remaining independent. An acquirer deciding what it can pay starts from standalone value and works out how much of the synergy it is willing to hand over.
Worked example
A target earns 100 of EBITDA and its peers trade at 8.0x, so standalone it is worth 800. A buyer with 20 of run rate cost savings values the same business at 960.
Paying 880 splits the 160 of created value evenly and prints in the precedent table as 8.8x, a multiple that was never available to a buyer without those savings.