Kaplan and Ruback took the cash flow forecasts from dozens of highly leveraged transactions and asked a simple question: does discounting them explain what buyers actually paid? The answer was yes, within about ten percent on average, and at least as accurately as multiples-based shortcuts. The forecasts themselves showed mild optimism, but the method held.
The Institute’s reading: owners tend to hear multiples because multiples are easy to say, and this paper is the standing rebuttal. A multiple is a compressed DCF with the assumptions hidden; doing the cash flow work forces the assumptions into the open, which is where a buyer or seller can actually argue with them. This is also why the Concierge explains valuation drivers but never quotes a number: the number belongs to the work.