Which IPEV technique is the most-used?

Multiples — across the typical established VC and PE portfolio, Multiples is the dominant technique for fair-value measurement of growth-stage and mature holdings. The reason is that observable peer multiples provide a clear market-anchor that auditors and LPs can verify; DCF is the second-most-common, applied where Multiples is less supportable; Net Assets, Industry Benchmarks, and Available Market Prices are used in specific narrower contexts.

What are the other two IPEV techniques?

The five investment-level techniques are: Multiples, Industry Benchmarks, Available Market Prices, DCF, and Net Assets. This page focuses on three of the five (Multiples, DCF, Net Assets). The two not covered here are: (a) **Industry Benchmarks** — observed metrics for comparable private or public peers, calibrated to the specific investment, used where the relevant industry has clear KPI benchmarks (e.g. SaaS net dollar retention, marketplace GMV per active user), and (b) **Available Market Prices** — recent transaction prices, public comparable prices, or other observable market evidence, used where a recent comparable transaction provides a strong anchor.

When should I use DCF instead of Multiples?

When the peer set for Multiples is thin or unconvincing, when the company operates in an atypical sector with limited public comparables, when the company has unusual capital structure or business model that makes peer multiples less meaningful, or when DCF is the industry-standard valuation method (infrastructure, project finance, utilities). DCF can also serve as the cross-check on a Multiples-primary conclusion for material holdings. The defensible position uses whichever technique is best-supported by the available data and uses the other as a cross-check where possible.

When is Net Assets the right technique?

In narrow circumstances: (a) very early-stage companies where operating cash flows are negligible and value is primarily in cash, IP, and identifiable assets, (b) asset-holding entities (real estate, natural resources, patent-holding vehicles) where the asset base is the operative value, and (c) distressed or wind-down situations where the going-concern assumption no longer holds. Net Assets is rare in typical growth and mature portfolios; choosing it for an operating company is a signal that something is wrong with the company or with the alternative techniques being applied.

How does calibration work in IPEV?

Calibration is the practice of testing the chosen technique by applying it as of the original investment date and confirming that the result matches (or reconciles to) the original investment price. If the multiple, DCF, or net-assets calculation at entry would have produced the entry price, the technique is well-calibrated. Subsequent applications should produce results that move in step with operating reality (revenue growth, profitability change, market multiple shifts). Where the calibration breaks — the entry-period reapplication does not reproduce the entry price — the chosen technique or its inputs need re-examination.

What is the role of marketability discount?

In Multiples (and to a lesser extent DCF), a marketability discount is sometimes applied to reflect the lack of a liquid market for private investments. The discount captures the value gap between an identical asset that could be sold immediately at the multiple and a private investment that requires a transaction process to realise. Typical discount ranges are 10-30% depending on stage and capital structure. The discount must be supported by evidence (specific studies, observed transactions, transparent reasoning) — pulling a number from a range without specific support is the most common audit challenge.

Do these techniques produce Level 3 fair values?

Almost always under IFRS 13 (UK and global) and ASC 820 (US). Level 1 requires quoted prices in active markets for the identical asset; Level 2 requires observable inputs for the same asset (similar in active markets, identical in inactive markets). Private investments rarely meet either threshold. Multiples uses peer prices that are observable but require significant adjustment; DCF uses unobservable forecast inputs; Net Assets uses fair-value inputs for the asset components. All three produce Level 3 fair values with the associated extensive disclosure requirements.

How does the choice of technique affect cross-framework reporting?

Materially less than fund managers sometimes assume. The IPEV-derived conclusion is the same whether it is being disclosed under IFRS 13 (UK and global) or ASC 820 (US) — the disclosure formats differ but the underlying value does not. Where a single fund reports under both frameworks (UK / global LPs and US LPs / feeder vehicles), the same IPEV-derived conclusion per investment supports both regulatory frameworks. The two frameworks diverge in specific narrow areas (NAV practical expedient, certain disclosure conventions) but not in ways that typically change the chosen IPEV technique or its conclusion.

Valuation Method

IPEV: Multiples vs DCF vs Net Assets

Three of IPEV's five techniques: multiples for established/mature, DCF for cash-generating with forecasts, net assets for early-stage or distressed.

IPEV's five investment-level techniques give VC and PE fund managers a structured toolkit for fair-value measurement. This comparison covers three of the five: Multiples (market-anchored), DCF (forward cash flow), and Net Assets (asset-based). Each suits a specific company stage and operating profile. The defensible position uses the right primary technique with a credible cross-check, calibrated continuously to the original transaction.

Criteria	Multiples	DCF and Net Assets
What it measures	Market-anchored value via observable multiples	DCF: forward cash-flow value. Net Assets: asset-based break-up or wind-down value
Best fit	Established growth-stage and mature companies with stable metrics	DCF: cash-generating with credible forecasts. Net Assets: very early stage / asset-holding / distressed
Data inputs	Peer set, multiples evidence, company financial metric, marketability and control adjustments	DCF: forecast, terminal, discount rate. Net Assets: asset and liability fair values
Sensitivity to peers	High — peer set composition drives value	DCF: low — primarily internal forecast. Net Assets: medium — depends on asset comparability
Defensibility in audit	High when peer set is credible	DCF: high when forecast is credible. Net Assets: high when asset list is complete
Frequency in portfolios	Most common across established holdings	DCF: common for cash-generating; Net Assets: rare and context-specific
Common pitfall	Peer set drift; marketability adjustment without evidence	DCF: terminal dominating value; mismatched cash flow and discount rate. Net Assets: incomplete asset list
Calibration discipline	Continuous — multiple at entry vs current multiple	DCF: forecast accuracy vs actuals over time. Net Assets: change in net assets across periods
Disclosure under IFRS 13 / ASC 820	Level 3 with peer set and adjustment disclosure	DCF: Level 3 with forecast and discount rate disclosure. Net Assets: Level 3 with asset list disclosure
Fit with control / marketability adjustments	Standard practice	DCF: less common adjustment; Net Assets: case-specific
Where the technique is wrong	Peer set is too narrow or biased	DCF: forecast not credible. Net Assets: company has meaningful operating value not captured in assets

When to Use Each Approach

Multiples

Established growth-stage and mature portfolio companies with stable metrics
Companies in sectors with clear public peer comparables
Where the metric the multiple applies to is meaningfully predictive (revenue for SaaS, EBITDA for industrials)
Cross-check on DCF conclusions for material holdings

DCF and Net Assets

DCF: cash-generating companies with credible forecasts
DCF: atypical sectors with limited public peer comparables
Net Assets: very early-stage companies with primarily cash and IP value
Net Assets: asset-holding entities; distressed or wind-down situations

Our Verdict

Multiples is the most-used IPEV technique across established growth-stage and mature portfolio companies. DCF is the natural second choice where Multiples is less supportable or where DCF is sector-standard. Net Assets is rare and context-specific. The defensible position uses the right technique for the company's stage and operating profile, with a credible cross-check where available, and continuous calibration to the original transaction.

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IPEV: Multiples vs DCF vs Net Assets

When to Use Each Approach

Multiples

DCF and Net Assets

Our Verdict

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