Backsolve Valuations
In the complex landscape of private market valuation, one reliable indicator of a company’s value is often a recent, arm’s-length transaction. The Backsolve feature within Scalar Portfolio Valuation Software is designed to leverage this data precisely.
Rather than relying solely on theoretical projections, the Backsolve method allows you to input a specific transaction—defined by the number of shares sold and the total capital raised—to mathematically derive the implied total equity value of the company.
Flexibility is key to accurate modeling. Once the transaction data is entered, Scalar allows you to run this backsolve calculation using the allocation methodology that best fits your capital structure. Using a Common Stock Equivalent method, a Waterfall distribution, or the industry-standard Option Pricing Model (OPM), the software seamlessly allocates the derived equity value across all share classes, ensuring compliance and precision.
However, valuations are rarely static. A transaction that occurred six months ago may not reflect the market reality of today. This is where Scalar’s Market Adjustment capabilities come into play.
After the initial equity value is determined via the Backsolve, you can apply a precise market adjustment to account for the time elapsed between the transaction date and your current valuation date.
By selecting a relevant market index or a peer group median, the software analyzes how the broader market performed during that specific window. If the market has shifted—for example, if the median of your peer group has increased by 10%—Scalar can automatically apply that same percentage adjustment to your calculated enterprise or equity value. This ensures your valuation remains current, defensible, and reflective of broader economic trends.
