Business Valuation in France 2026: DCF, Multiples and Net Asset Methods for M&A

Business Valuation in France 2026: DCF, Multiples and Net Asset Methods for M&A

Business valuation is the prerequisite to any sale, merger, fundraising or capital restructuring. It never delivers a single value but a range of values derived from several complementary methods. In 2026, in a context of persistently high rates and increased risk premium, methodological rigour is more essential than ever.

Fundamental Distinction: Enterprise Value vs Equity Value

Enterprise Value (EV)

Enterprise Value corresponds to the value of the operating tool, regardless of its financing structure. It is used to compare companies with different capital structures.

Equity Value

Equity Value is what the shareholder receives. It is obtained by:

Equity Value = Enterprise Value – Net Financial Debt ± adjustments

Adjustments include: net financial debt, working capital surplus/deficit versus normative, off-balance sheet commitments, end-of-career indemnities, declared but unpaid dividends.

Valuation Methods

1. Asset-Based Method (Adjusted Net Asset Value)

The Adjusted Net Asset Value (ANAV) consists of revaluing each asset and liability item at its market value.

Relevance: asset-heavy companies (real estate, holding companies), holdings, companies in cessation of business. Limitations: does not capture operating value, ignores unrecorded intangibles (internal brands, know-how).

2. Comparables Method (Multiples)

Trading Multiples

Capitalisation multiples of comparable listed companies are observed: EV/EBITDA, EV/EBIT, EV/Revenue, PER (Price Earning Ratio).

Transaction Multiples

Multiples paid in recent M&A transactions in the sector are observed. These multiples generally incorporate a control premium (15% to 30%).

Indicative 2026 sectoral multiples (EV/EBITDA):

• Tech / SaaS: 8x to 15x
• Industry: 5x to 8x
• Distribution / Retail: 4x to 7x
• Business services: 6x to 10x
• Healthcare: 8x to 12x

Relevance: mature companies with identifiable comparable activity. Limitations: availability of relevant samples, quality of transactional information.

3. Discounted Cash Flow (DCF) Method

The DCF method discounts future free cash flows at a rate representative of the risk (Weighted Average Cost of Capital, or WACC).

Simplified formula:

EV = Σ (FCF_t / (1+WACC)^t) + Terminal Value / (1+WACC)^n

Where:

• FCF (Free Cash Flow) = EBIT × (1 – CIT) + Depreciation – Investments – Working Capital Change
• WACC = Cost of Equity × (E/V) + Cost of Debt × (1–CIT) × (D/V)
• Terminal Value = Normative FCF × (1+g) / (WACC – g)

Relevance: companies with detailed and predictable business plan. Limitations: sensitivity to assumptions (perpetual growth rate, WACC), circularity risk in WACC determination.

4. Goodwill Method

Combines asset value and earning capacity. Calculates a superprofit (goodwill annuity) added to the adjusted net asset value.

5. Specific Methods

• SMEs: EBITDA multiples, sometimes revenue multiples
• Start-ups: Venture Capital Method, funding round comparables
• Goodwill (fonds de commerce): professional benchmarks (revenue multiples by sector)
• Distressed companies: amicable liquidation value, going-concern value, partial asset contribution value

The Valuation Triangle

The three main methods (asset-based, comparables, DCF) must converge to a coherent range. Strong divergence reveals:

• An anomaly in assumptions
• An atypical situation (sector bubble, market distortion)
• A hidden asset or liability

From Price to Transaction: Adjustments

Closing Adjustment

The price negotiated on reference accounts is adjusted at closing date based on actual situation:

• Locked box: price fixed on audited reference accounts, no post-closing adjustment (with a no-leakage clause)
• Closing accounts: price adjusted ex-post per accounts established at closing

Earn-out

A fraction of the price is deferred and conditioned on future performance objectives (revenue, EBITDA, specific event). See our dedicated earn-out article.

Vendor Loan

Phased payment, sometimes at preferential rate, constituting both a valuation factor and a financing instrument.

Discounts and Premiums

• Minority discount: 15% to 30% for non-majority stakes
• Illiquidity discount: 20% to 40% for unlisted shares
• Control premium: 15% to 30% for majority blocks
• Conglomerate discount: 10% to 20% for diversified holdings

Valuation and Tax Law

The tax administration has tools to challenge the retained valuation:

• Gifts and inheritance: market value (article 666 French Tax Code)
• Contributions to companies: real value, under penalty of reassessment (Cass. com., 7 March 1989, no. 87-15.832)
• Intra-group transfers: transfer pricing and abnormal management act doctrine

The Dutreil Pact (article 787 B French Tax Code) allows, under conditions, a 75% abatement on the value of transferred shares.

Role of Expert in Litigation

In case of disagreement, the valuation expert may be:

• Contractual (article 1592 of the Civil Code): their decision binds the parties, save for gross error (Cass. com., 8 February 2017, no. 15-26.193)
• Judicial: appointed by the court in case of litigation

Reference Case Law

• Cass. com., 8 February 2017, no. 15-26.193: scope of article 1592 expert opinion
• Cass. com., 7 March 1989, no. 87-15.832: real value in contributions
• Cass. com., 16 June 2015, no. 14-12.969: conditions of illiquidity discount
• CE, 11 December 2008, no. 296666: valuation methodology accepted by tax administration

Conclusion

Business valuation is an exercise at the intersection of finance, law and strategy. No single method delivers truth; it is the convergence of multiple approaches, supported by rigorous due diligence, that yields a defensible range. In negotiation, mastering valuation conditions the ability to argue price, structure adjustments and anticipate possible subsequent disputes.

Sources: French Civil Code (article 1592), French Tax Code (articles 666, 787 B), CNCC, SFAF, Cour de cassation and Conseil d'État case law.