What Multiples Are Businesses Selling For?

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What Multiples Are Businesses Selling For?

Upon deciding to sell their business, or even while making the decision, an owner will most likely want to know what they can expect to receive in the sale. Many factors go into determining the value of a business at market. One such factor is the state of the market and how much other similar businesses are selling for.

Recently, Pepperdine Private Capital Markets Project (in conjunction with the International Business Brokers Association and M&A Source) analyzed data from its 2018 Q3 Market Pulse survey completed by business intermediaries, M&A advisors, and other business transaction professionals based on their recent deal experiences to determine what multiple businesses were selling for. Here’s what they found:

In the $5MM- $50MM deal range, the median EBITDA multiple paid was 5.4 and the median SDE multiple paid was 3.8.

In the $2MM- $5MM deal range, the median EBITDA multiple paid was 4.0 and the median SDE multiple paid was 3.0.

In the $1MM- $2MM deal range, the median EBITDA multiple paid was 3.9 and the median SDE multiple paid was 3.3.

In the $500K- $1MM deal range, the median EBITDA multiple paid was 3.1 and the median SDE multiple paid was 2.8.

Finally, for deals less than $500K, the median EBITDA multiple paid was 1.9 and the median SDE multiple paid was 2.0.

As you can see, the general trend is the larger the deal size, the larger the multiple. This is likely because larger companies are likely to be seen as less of a risk for the buyer who would in turn be more willing to pay more for a business that has a higher chance of a favorable ROI.

Selling your business can be a very eye-opening experience. Many first time sellers come in to the process with a pre-determined amount that they believe they will receive for their business. Understandably so, their business is worth a lot to them. However, given the many factors that go into determining the amount a buyer is willing to pay for your business, having a professional valuation completed is the best way to get an idea of what to expect when you go to market.

To gain insight on these and other current market conditions, contact Anthony Citrolo of The NYBB Group. The NYBB Group can be a resource to help business owners determine the marketability and approximate value of their business.

If you would like to discuss this article or schedule a private and complementary consultation, please contact Anthony at anthony@nybbinc.com or 516-346-5272.

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