Changing multiple's given the current market

searcher profile

October 02, 2023

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

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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commentor profile
Reply by an intermediary
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.
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I was just at a conference this weekend where this was a major topic of conversation. I think the consensus is that multiples really have not gone down but what people have seen instead is more creative forms of financing with larger seller notes, forgivable sellers notes, etc. Everyone agrees that multiples should be going down, but there appears to be too much demand for quality businesses that lower multiples has not materialized yet. I hope this helps.
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