Module II· Multiples & Sector SpecificsAdvanced

Question

How do you handle multiples in distressed sectors?

Answer

Mechanics

Distressed sectors (e.g. print media from 2015 on, coal/mining under ESG pressure) have structurally low multiples — but spot multiples are not the floor: further decline can compress them more. Methods:

NAV-based instead of an EBITDA multiple: show liquidation value.
Run-off DCF: explicit decline modeling instead of Gordon with a negative g.
EV/Replacement cost: a floor for capital-intensive distressed sectors.
Distressed comp universe: use only other distressed sectors as comps, not 'normal' industrials. Pitfall: 4x EV/EBITDA in a distressed sector looks 'cheap' but can be value-destroying under structural decline (FCF-negative).

Deep diveShow more details

Pitch tip

For distressed names: 'Multiple-based methods are unreliable; primary valuation via NAV ($450m) cross-checked with a liquidation analysis ($280m floor).'

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