Anybody with experience valuing security alarm companies with MRR?

by a searcher from University of Pennsylvania - The Wharton School

1 year ago

All, I am looking at a security alarm company with ~$3M in EBITDA, mix of commercial and residential.
Owner is quoting multiples based on the monthly recurring revenue - and I would love to get a sense for the multiple range of similar closed deals...and how to best adjust depending on his churn rates. Anybody who has experience/benchmarks in this field?

His business model for commercial and residential is also very different, would love to understand what a PE company values most as I dig into this deal.

Thank you!

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searcher from University of Pennsylvania - The Wharton School

Echoing what others have said I don't think I have a ton of visibility into lower, lower middle market MMR multiples, but you may be able to find something using the BVR valuations tab or just by Googling. Broadly the multiple you're paying is driven by a) growth and b) earnings quality or margin. If the business isn't actually growing and is profitable, I think you might be okay thinking about it on an EBITDA multiple basis honestly

1 year ago | like reply | 0 likes

searcher from Harvard University - Harvard Business School

Don't know current market multiples, especially for smaller end of market, but I worked at Vivint just after Blackstone bought it. MRR was the way the whole industry talked about valuation. Illogical perhaps? yes. Vivint is public and just agreed to be bought, so you could reverse engineer a public market comp as at least one data point. VVNT

1 year ago | like reply | 0 likes

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