Changing multiple's given the current market

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by a searcher from Fachhochschule Pforzheim, Hochschule für Gestaltung, Technik und Wirtschaft
in Ulm, Germany

2yrs ago

Changing multiple's given the current market

Hi all,

I am wondering, if anyone has seen or got the feeling in conversations that the multiples are going down? Given that financing costs and risk is going up in this environment one would expect to see multiples go down, no?

Ali

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reply by an intermediary 2yrs ago
from Texas A&M University in Houston, TX, USA

Multiples are not compressing overall. Lots of money chasing too few deals. Wouldn’t expect multiples to compress. I would expect rather the pool of qualified buyers for sub $5mm transaction perhaps getting smaller as those that are financing reliant may be having more trouble securing approval right now or being able to service the debt service as easily as they want. Still there are plenty of investors out there with the capital needed to take down an acquisition, that can put in a
more equity if needed and as someone mentioned, sellers may be more open to seller notes for part of the consideration. All this to say for good companies, buyers won’t be hard to find and given strong demand multiples should remain consistent.

reply by an intermediary 2yrs ago
in Campbell, CA, USA

I think that would be a logical conclusion if it were the only variable. I agree that sellers have been more open to seller financing, especially the ones who are burned out and/or retiring. I have seen multiples inflating slightly on asking prices.