Market Approach in 2025: A Practical Guide for Australian Valuations

The way we value businesses and assets is evolving fast in Australia, and the market approach is at the heart of this change. As 2025 ushers in new regulations and a more data-driven financial landscape, understanding the market approach has never been more critical—whether you’re a business owner, investor, or advisor navigating high-stakes decisions.

What Is the Market Approach—and Why Does It Matter?

The market approach is a valuation method that determines the value of an asset or business by comparing it to recent sales of similar assets. Think of it as the real estate agent’s go-to: what did comparable properties sell for in your suburb? In finance, this logic applies to companies, machinery, intellectual property, and even cryptocurrencies.

Key features of the market approach:

• Data-Driven: Relies on real, observable transactions in the open market.

• Objective: Minimises subjectivity by anchoring value to what buyers have actually paid.

• Widely Used: Essential for mergers & acquisitions, tax compliance, financial reporting, and dispute resolution.

In 2025, with ASIC and the ATO ramping up scrutiny on business valuations—especially for SME sales and start-up equity deals—getting the market approach right is no longer optional. Transparency and defensibility are the name of the game.

How Does the Market Approach Work in Practice?

The market approach typically unfolds in two main ways:

• Guideline Public Company Method: Compares the target business to similar publicly traded companies. Common for larger businesses with robust financials.

• Precedent Transaction Method: Looks at recent sales of comparable private companies or assets. This is especially relevant for SMEs and niche industries in Australia.

For example, if you’re valuing a family-owned coffee roastery in Melbourne, you’d analyse recent sales of similar roasteries—adjusting for size, location, and profitability. In 2025, digital platforms such as BizBuySell and CoreLogic are increasingly providing rich, anonymised transaction data, making these comparisons sharper and more accurate.

Key steps:

• Identify comparable sales (“comps”) based on sector, size, and timing.

• Calculate relevant multiples (e.g., price/earnings, EV/EBITDA, price/revenue).

• Adjust for differences in growth prospects, risk, and asset quality.

• Apply the multiple to the subject business’s metrics to estimate value.

Real-world example: In early 2025, a Sydney-based SaaS start-up was valued for acquisition using a revenue multiple derived from recent exits of similar ANZ tech firms. The deal closed at a 6x revenue multiple, slightly above the 2024 median, reflecting the company’s strong recurring revenue and new IP protections introduced under the Treasury Laws Amendment (2025 Measures No. 1) Bill.

2025 Policy Updates: What’s New for Market-Based Valuations?

Several regulatory and market shifts are shaping how the market approach is applied in Australia this year:

• Mandatory Disclosure: ASIC’s 2025 guidelines require clearer disclosure of valuation inputs and sources in all prospectuses and SME sale agreements. This means more transparency in how comps are selected and adjusted.

• Data Integrity: The ATO has tightened its stance on using outlier transactions or overseas comparables for tax valuations. Expect closer scrutiny of “cherry-picked” comps and a preference for Australian transaction data.

• Technology Integration: New platforms are aggregating anonymised deal data, making it easier for small business owners and their advisors to benchmark valuations without expensive consultants.

• Focus on ESG: Environmental, social, and governance (ESG) factors are increasingly influencing multiples, especially in sectors like renewable energy, healthcare, and tech.

For instance, an agribusiness in regional Victoria saw its market value jump in 2025 after the federal Clean Energy Investment Scheme was extended, boosting demand (and multiples) for low-emissions farm assets.

Best Practices for Using the Market Approach in 2025

To get the most accurate and defensible valuation, keep these tips in mind:

• Use multiple comps: Don’t rely on a single transaction—triangulate with several to smooth out anomalies.

• Adjust for timing: Factor in economic conditions and market cycles. A sale in 2022 may not reflect 2025 realities.

• Document your process: With stricter regulations, keep clear records of how comps were chosen and adjustments made.

• Consider sector-specific factors: In fast-moving industries (like fintech or EV infrastructure), look for the most recent and relevant transactions.

The Bottom Line

The market approach is more relevant than ever in Australia’s dynamic 2025 financial landscape. With greater regulatory scrutiny and more robust data sources, valuations are becoming more transparent and defensible. Whether you’re selling a business, seeking investment, or preparing for tax season, mastering this approach can mean the difference between a fair deal and a costly misstep.