Southard Financial
Market Multiples

What You Need to Know About Market Multiples

Knowing your business’s value not only helps alleviate fears of not understanding what’s really going on with your business, but it also helps you determine when it’s time to make changes in your staff, infrastructure, or products. 

An important component of knowing your business’s value is understanding the potential valuation multiple. A valuation multiple is a financial measurement tool that determines a business’s value by multiplying the Company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) by a multiple observed from sales of similar companies. 

You gather multiple data by looking at other M&A transactions that are: 

  1. Recent in Time
  2. Similar in Size of Revenue or EBITDA
  3. Analogous Industry
  4. Comparable Location

But how do you learn what other businesses are selling for and their valuation multiples? One of the tools we use to research market multiples is GF Data, a middle-market data aggregator that pours through thousands of private equity-sponsored M&A transactions with enterprise values of $10 to 250 million so as to pool the transaction data that will, in turn, help us help you know the value of your business.

Time

Looking back to the GF Data report from the 4th Quarter of 2019, we can see some helpful trends surrounding the M&A market that helps us gain an understanding of the range of current market multiples as we look forward to 2020. 

EBITDA Multiples

Valuation multiples in 2019 from the data gathered from 274 business sales between $10 and $250 million in value ranged from 5.7x to 8.1x on average. To drill down further, we see that businesses in the $10-$25 million range had an average EBITDA multiple of 6.1x, businesses in the $25-$50 million range had an average EBITDA multiple of 7.0x, businesses in the $50-$100 million range had an average EBITDA multiple of 7.4x, and business in the range of $100-$250 million had an average EBITDA multiple of 9.5x.

While these broad numbers get us in the right area, they aren’t enough to fully find a business’s value. There are many types of transactions, so we can drill even deeper, as the following chart displays.

Valuation Drilldown by Pricing Factor

Industry 

While this, too, is helpful information, getting that kind of transaction type information cross-referenced with your industry type is invaluable. An oil company and a guitar company can’t rightly be compared when it comes to determining value. So comparing businesses of like type will get you much further in choosing the right EBITDA multiple that will ultimately help you understand the value of your own business.

We can utilize the GF Data information for general industries so that you can be sure that the value multiplier we assign is similar to other businesses sold of like size, type, and location.

TEV/EBITDA by Industry

We Can Help With Market Multiples

No matter what industry you’re in, we can provide you with an accurate valuation of your business. We have 30+ years of experience taking businesses like yours through our well-tested process that will, in the end, help you know how much your business is worth. Schedule a call (or go ahead and call us—901-761-7500) today and start having the peace of mind that comes with knowing.

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Recent Activities

  • Southard Financial facilitated the sale of Memphis' own Cooper Glass Company

    Southard Financial facilitated the sale of Memphis' own Cooper Glass Company
  • David A. Harris and Mark A. Orndorff spoke at the 2019 Annual Fall Conference of the New South Chapter of The ESOP Association

    David A. Harris and Mark A. Orndorff spoke at the 2019 Annual Fall Conference of the New South Chapter of The ESOP Association held in Orlando, Florida on October 16-17. They gave a presentation titled “Can Employees Really Impact Company Value?”

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  • David A. Harris spoke at The Fall ESOP Forum of the NCEO

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    David A. Harris spoke at the 2018 Annual Fall Conference of the New South Chapter of The ESOP Association held in Birmingham, Alabama in September, 2018. He led a workshop called “The People’s Roundtable Interactive Workshop – A series of ‘Build to Last’ activities that focus on developing successful communication and team building programs for employee owners of all generations.” Speakers included Dolores Lawrence, Blue Ridge ESOP Associates; Lindsay Baublitz, SCandH Capital; David Harris, Southard Financial LLC

  • Mark A. Orndorff spoke at the ESOP Nuts & Bolts Seminar of the NCEO

    Mark A. Orndorff spoke at the ESOP Nuts and Bolts Seminar of the NCEO (National Center for Employee Ownership) held in Indianapolis, Indiana in August, 2018 on the topic of “What’s Your Company Worth? – ESOP Valuation.”

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  • Mark A. Orndorff spoke at the American Booksellers Association Winter Institute

    Mark A. Orndorff spoke at the American Booksellers Association Winter Institute 2018 held in Memphis, TN in January, 2018 on the topic of Succession Planning titled “What is Your ‘End Goal’?”

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