A profitable factory can still struggle to pay its banks. Two manufacturers reporting identical EBITDA can command very different prices. For an owner considering a sale, a new investor or a refinancing, company valuation must explain these differences—not hide them behind a single multiple.

Lev Partners uses discounted cash flow, listed-company comparables, precedent transactions and adjusted net asset value. Our approach connects these methods to the business underneath the accounts: earnings quality, collection patterns, production economics, financing obligations and the investment needed to keep the factory competitive.

All financial examples and charts below are illustrative, not client results or market quotations. USD and TRY examples are separate. Regulatory information is reviewed as of 9 October 2026.

1. What exactly are we valuing?

Enterprise value measures the operating business before allocating value between financing providers. Equity value is the residual attributable to shareholders after the relevant debt, cash and other agreed adjustments. A quoted enterprise value is therefore not necessarily the amount a seller receives.

The perimeter matters. Are we valuing all shares, a minority interest, a factory asset sale or a group that also owns surplus property? Does a financing round inject money into the company, purchase the owner's existing shares, or combine both? These questions change both the analysis and the interpretation of the headline number.

2. Same EBITDA, different cash generation

Consider two manufacturers, each with USD 50 million revenue and USD 8 million normalized EBITDA. Both incur USD 2 million depreciation, leaving USD 6 million EBIT. Assume USD 1.5 million cash tax on operating profit for illustration. Company A needs USD 2 million capital expenditure and USD 0.5 million additional working capital. Company B needs USD 3 million capital expenditure and USD 1.5 million additional working capital.

A therefore generates USD 4 million unlevered free cash flow; B generates USD 2 million. The calculation is EBIT less cash operating tax, plus depreciation, less capital expenditure and the increase in operating working capital. EBITDA alone conceals this difference.

Discounted cash flow: value follows future cash

DCF forecasts the cash the business can sustainably generate, then discounts it for time and risk. Assume five annual free cash flows of USD 4.0, 4.8, 5.6, 6.3 and 7.0 million for A, compared with USD 2.0, 2.5, 3.0, 3.5 and 4.0 million for B. At an illustrative 14% weighted average cost of capital and 3% perpetual growth, with year-end cash flows, enterprise values are approximately USD 52.39 million and USD 29.31 million.

These are scenario outputs, not recommended discount rates for every Turkish manufacturer. Forecast currency, inflation, country exposure, business risk and financing structure must be consistent. A dollar cash-flow model cannot simply use a nominal lira discount rate.

What is terminal value?

A five-year forecast does not mean the factory closes in year six. Terminal value estimates the value of cash generated after the explicit forecast period. Under a perpetual-growth method, it equals next year's sustainable free cash flow divided by the discount rate minus perpetual growth.

For A, year-six cash flow is 7.0 × 1.03 = USD 7.21 million. Terminal value at the end of year five is 7.21 ÷ (14% − 3%) = USD 65.55 million. Discounted back five years, it contributes about USD 34.04 million; the explicit forecast contributes USD 18.35 million. Together they produce USD 52.39 million.

Terminal value is neither cash available today nor a guaranteed future sale price. It represents about 65% of A's modeled enterprise value, making sustainable margins, maintenance investment, working capital and long-term growth particularly important. Growth must remain below the discount rate and must be funded by realistic reinvestment. We test sensitivity rather than present a single precise-looking result as certainty.

3. Three additional valuation methods—and when they help

Listed-company multiples

Public-market comparables provide a market reference. Illustratively, USD 7.5 million normalized EBITDA at 6–8 times implies USD 45–60 million enterprise value. These multiples are assumptions, not current sector evidence. Actual selection requires comparable products, margins, growth, customer concentration, capital intensity and geography, with consistent accounting treatment.

A diversified branded producer should not automatically receive the multiple of a subcontract manufacturer with one dominant customer. Lease accounting and exceptional earnings also need to be aligned before comparing EV/EBITDA.

Precedent transaction multiples

Acquisition transactions show what buyers paid under particular conditions. A USD 60 million enterprise value divided by USD 8 million comparable EBITDA is 7.5 times. But an announced price may instead represent equity value, a partial stake, deferred consideration or an earn-out. Control, strategic synergies, timing and financing conditions can make direct comparisons misleading.

Adjusted net asset value

For an asset-heavy business, we assess recoverable asset values and relevant liabilities. If adjusted assets are USD 64 million and liabilities USD 23 million, adjusted net asset value is USD 41 million. Book value is not automatically market value: equipment condition, obsolescence, title, liens, remediation costs and sale costs can matter.

Net asset value is especially useful as a cross-check, or where operations are being restructured or liquidated. It does not automatically capture an established customer base, organizational know-how or profitable production contracts. Equally, assets cannot always be sold at their individual appraised values without disrupting the business.

4. Lev's approach: move from reported profit to sustainable earnings

Quality of earnings, or QoE, asks whether reported profit is recurring, supported and commercially sustainable. We examine available transaction-level records within the engagement scope: sales invoices and subsequent collections, credit notes, purchase records, inventory movements, related-party balances and period-end cut-off.

Suppose reported EBITDA is USD 8 million. Adding back USD 0.4 million genuinely non-recurring legal costs, removing USD 0.6 million non-recurring grants and allowing USD 0.3 million for a necessary replacement management role produces USD 7.5 million normalized EBITDA. At 7 times, that USD 0.5 million difference changes enterprise value by USD 3.5 million.

Every adjustment needs evidence. A cost that reappears every year is not exceptional simply because management describes it that way. We also distinguish accounting normalization from achievable future improvements: an unimplemented cost-saving plan is not existing earnings.

Working capital must fit the industry's natural cycle

A manufacturer may legitimately sell on 90-day terms to major OEM customers. That is different from overdue invoices owed by customers who cannot pay. We compare contractual terms, aging, collections after the reporting date, disputes, export documentation and concentration. Supplier terms and inventory requirements must be assessed alongside receivables.

In this example, a 30-day extension in collections on USD 50 million annual credit sales absorbs approximately USD 4.11 million. A growing order book can therefore increase financing needs before it increases available cash. Seasonal stocking, safety stock, imported components and long production cycles all affect the normal working-capital requirement.

We do not value every company in the same way. Sector economics, country and currency exposure, brand strength, customer contracts and production capabilities shape the forecast and the market comparison. Brand value must be supported by pricing power, repeat demand or other evidence; adding an arbitrary brand premium to a DCF that already captures these benefits would count them twice.

5. “I am profitable, but interest expense and debt are high. What happens to my valuation?”

Profitability supports operating value, but debt reduces the value left for shareholders. The effect has three channels. First, net debt is deducted in the enterprise-to-equity bridge. Second, financial stress may damage operations by limiting raw-material purchases, maintenance or the ability to accept orders. Third, refinancing needs, covenants and security packages can influence the structure and timing of a transaction.

Both businesses above have TRY 300 million enterprise value. A has TRY 80 million debt and TRY 20 million excess cash: net debt is TRY 60 million and equity value TRY 240 million. B has TRY 180 million debt and the same excess cash: equity value falls to TRY 140 million. This isolates leverage; it assumes identical operations and no other adjustments.

In practice, debt-like items, shareholder loans, overdue obligations, normal working capital and restricted or operating cash must be reviewed. A bank balance is not automatically distributable excess cash. Using another example, USD 52.39 million enterprise value less USD 15 million debt, less USD 2 million debt-like items, plus USD 5 million excess cash gives USD 40.39 million equity value before further agreed adjustments.

Avoid deducting financing costs twice

An unlevered DCF values free cash flow to the firm before financing cash flows and uses WACC; net debt is then deducted to reach equity. An equity cash-flow model instead includes interest and net borrowing and uses the cost of equity. Mixing these approaches can understate or overstate value.

Repaying TRY 20 million debt with TRY 20 million existing cash reduces both equally; it does not automatically create TRY 20 million extra equity value. Generating additional operating cash, improving financing terms after costs, or reducing genuine business risk can create value. Extending maturities can ease liquidity pressure, but it does not erase the debt.

6. What can an owner do to improve value before a transaction?

• Explain profitability by customer and product: identify loss-making orders, scrap, rework, freight and energy costs. Revenue growth without contribution margin may consume cash.

• Convert receivables into cash: resolve disputes, tighten collections and align sales incentives with payment. Assess the commercial cost of changing credit terms.

• Release unnecessary inventory: distinguish strategic safety stock from obsolete materials and slow-moving finished goods. Avoid compromising delivery reliability.

• Make debt manageable: map maturities, currencies, interest costs, covenants and collateral; prepare a 13-week cash forecast and a 12–24-month funding plan for lender discussions.

• Reduce dependence: strengthen second-line management, customer diversification, documentation and contract continuity.

• Prove the numbers: deliver consistent monthly reporting, reconciliations, defensible QoE adjustments and a realistic maintenance-versus-growth capex plan.

A one-off release of working capital is not recurring EBITDA. Improvements should enter the model in the correct period, with implementation costs and realistic execution assumptions. The same benefit must not be counted both in forecast cash flows and again as an independent valuation premium.

This is where CFO services and M&A advisory intersect: reliable reporting supports financing discussions and allows a prospective buyer to test the investment case.

7. Türkiye's manufacturing tax change: model 2027 separately

Law No. 7582 introduces a 12.5% corporate income tax rate on qualifying production earnings of companies holding an industrial registry certificate and actually engaged in production. It applies to earnings from 2027 onward, including special accounting periods beginning in 2027. This is a reduced tax rate, not a blanket exemption of half of all company income. The additional export rate reduction does not apply to the same earnings benefiting from this provision.

For a simplified TRY 20 million qualifying tax base, tax is TRY 5 million at 25%, TRY 4.8 million at 24%, TRY 4 million at 20% and TRY 2.5 million at 12.5%. The benefit is therefore TRY 2.5 million, TRY 2.3 million or TRY 1.5 million depending on the appropriate starting comparison—not universally half of the company's previous tax bill.

Lower income tax does not raise EBITDA. It can improve after-tax cash flow and therefore valuation, subject to eligibility, timing and risk. Forecasts must also account for losses, other incentives, minimum-tax rules where relevant, mixed activities and a consistent treatment of the debt tax shield. A company's tax adviser should validate the applicable calculation. A potential benefit from 2027 does not solve a loan payment due today.

Discuss the value drivers of your business

Lev Partners connects valuation to the practical decision: preparing for a sale, introducing an investor, evaluating an acquisition or strengthening the business before approaching the market. Our work can include earnings normalization, cash-flow projections, comparable analysis, debt and working-capital bridges, and scenario-based valuation conclusions.

Erim N. Kargacı — Partner & M&A Director
Erim leads Lev Partners' M&A advisory work across company sales, acquisitions and investor searches, connecting transaction preparation with valuation and execution.

Contact Lev Partners to discuss your company's valuation and transaction plans. Share your sector, geography, approximate scale and objective so we can focus the first discussion on the relevant value drivers.

Related reading: Company Valuation: Methods, Worked Examples and M&A Decisions.

Sources and methodology

Turkish Parliament — Law No. 7582, Articles 8 and 14; Turkish Revenue Administration — corporate income tax rates; CFA Institute — free cash flow valuation. Financial examples are Lev Partners illustrative calculations. The cover is an AI-generated industrial illustration, not a client facility. This article provides general information; a company-specific valuation requires verified data and defined assumptions.