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This discount in an EMI valuation concerns macroeconomic factors or trends that could affect your valuation. We recommend a total of around 20% as the upper limit for this section.

Two guidelines on whether a factor will hold up

1. It must be an industry or sector-specific effect, not a general one. A macroeconomic factor or trend that has kicked in and affected your industry specifically is what makes for a defensible argument.
2. It must have arisen after the benchmark transaction. Anything that was already true at the time of the round can be assumed to have been reflected in the price paid by the investor.

Provide facts and figures wherever you can. A stated percentage decline in sector valuations, a named index or comparator, a specific fall in deal volumes, or published sector data makes this discount far more defensible than a general assertion.

Examples of weak arguments

• "COVID made trading conditions difficult."
• "Tariffs have created uncertainty for everyone."
• "The cost of living crisis has hit consumer spending."
• "Inflation has gone up."

Your arguments should instead be reframed around a specific, evidenced impact on your own industry. See examples below

Examples:

A. Sector funding pullback

Since the benchmark transaction, investor appetite for your sector has fallen, with a measurable drop in deal volumes and available capital. You can insert evidence here, e.g. figures on sector funding rounds year on year. A hypothetical purchaser would recognise the company faces a harder path to raising further capital at the benchmark price.

B. Sector demand or structural shift

Since the benchmark transaction, a specific development, e.g. a technology shift, a change in customer behaviour, a new entrant, has altered the demand outlook for your sector. You can insert evidence here. A hypothetical purchaser would price in this deterioration in the sector's prospects.

C. Sector-specific input or supply shock

Since the benchmark transaction, a specific input cost, supply constraint or trade measure has directly affected your sector's cost base or ability to operate. You can insert evidence here, e.g. the percentage rise in the relevant input cost. A hypothetical purchaser would factor this sector-specific pressure into the price.

D. Sector-specific regulatory or policy change

Since the benchmark transaction, a named regulatory or policy change has come into effect and materially affects your sector. You can insert evidence here. A hypothetical purchaser would discount for the added cost, restriction or uncertainty this creates for companies in the sector.