Yale Case. By: Leslie Cheek IV, Peter S. Kies, and A. J. Wasserstein
This Yale case argues that the primary driver of value creation in ETA is not simply improving a company’s financial performance, but achieving a higher EBITDA valuation multiple at exit. Drawing on previous research, the authors estimate that roughly 80% of equity value creation in SF investments comes from EBITDA multiple expansion rather than EBITDA growth itself. While increasing revenue and improving operations remain important, they primarily serve as enablers of higher valuation multiples rather than being the main source of returns.
The article emphasizes that multiple expansion is not a random outcome driven solely by market conditions. Instead, it can be deliberately engineered through two complementary efforts: building a business that is highly attractive to potential buyers and executing a disciplined, competitive sale process. The CEO is responsible for strengthening the company’s fundamentals during the ownership period, while investment bankers play the central role in maximizing valuation during the exit.
According to the authors, investment bankers create value far beyond simply finding buyers. They develop a compelling investment narrative, prepare professional marketing materials, identify the most suitable strategic and financial acquirers, carefully control the flow of information, and manage a structured auction process that encourages multiple bidders to compete aggressively. This competitive tension often results in buyers paying premium valuations. Although the paper does not provide empirical evidence proving the direct impact of investment bankers on valuation, the authors argue that experienced bankers consistently increase the probability of achieving top-of-market pricing.
The article also provides detailed guidance on selecting the right investment banking partner. CEOs should evaluate firms based on their industry expertise, size, buyer relationships, transaction experience, quality of the deal team, and disciplined approach to executing sale processes. The authors caution against choosing bankers solely because they promise the highest valuation, arguing that credibility, execution capabilities, and cultural fit are much better predictors of a successful outcome. They also strongly recommend engaging bankers several years before a planned exit so they can advise management on strategic decisions that enhance valuation over time.
The paper outlines the three major phases of a sell-side M&A process. The preparation phase involves conducting extensive due diligence, building credible financial projections, organizing financial and operational data, preparing quality-of-earnings reports, establishing a virtual data room, and producing key marketing materials such as teasers and CIMs. During the market creation phase, bankers contact a broad universe of strategic and financial buyers to generate interest and identify potential bidders. Finally, the competitive auction phase consists of multiple bidding rounds, management presentations, negotiations, and final offers, all designed to maximize competition and secure the highest possible valuation while optimizing deal terms.
The authors stress that CEOs should actively support the sale process by becoming outstanding clients for their investment bankers. They recommend respecting the bankers’ expertise, responding rapidly to information requests, maintaining accurate financial forecasts, thoroughly preparing for management presentations, and following a consistent communication strategy throughout the transaction. Because management presentations often determine buyers’ confidence in the leadership team, CEOs are encouraged to treat them as carefully rehearsed performances rather than informal discussions.
Beyond the transaction itself, the article explains that achieving premium valuations requires years of preparation. Companies that command the highest EBITDA multiples typically possess clean financial statements, strong internal controls, institutional-quality systems, recurring and diversified revenue streams, scalable operations, professional management teams, robust KPI reporting, and documented operating procedures. Buyers also value businesses that demonstrate proven organic growth, successful acquisition integration, pricing power, customer retention, and a compelling strategic position supported by measurable evidence rather than optimistic projections. Reducing operational and organizational risk ultimately increases buyer confidence and leads to higher valuation multiples.
The authors conclude that maximizing enterprise value is the result of combining operational excellence with a carefully orchestrated sale process. CEOs must build a high-quality, scalable company long before the exit, while experienced investment bankers are responsible for creating competitive bidding dynamics that unlock premium valuations. When these two elements work together, companies significantly improve their chances of achieving substantial EBITDA multiple expansion and maximizing shareholder returns during an ETA exit.
Read the full case in: https://som.yale.edu/sites/default/files/2026-06/Engineering%20EBITDA%20Multiple%20Expansion%20and%20the%20Paramount%20Role%20of%20Investment%20Bankers%20in%20ETA%20Exits.pdf
