Does any know the range for EBITDA a search fund typically falls under?

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January 09, 2022

by a searcher from The Ohio State University - Max M. Fisher College of Business in United States

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Reply by a searcher
from Stanford University in New York, NY, USA
Unfortunately it totally depends on the industry and type of business you're buying. If you look at page 24 Stanford's 2020 study you'll see a range of 4-6x EBITDA over the last couple decades, but for example you want to buy a small SaaS business you'd pay much higher and if you want to buy a business in certain geographies, like around NYC, you'd pay a premium as well

(https://www.gsb.stanford.edu/faculty-research/case-studies/2020-search-fund-study-selected-observations)
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Reply by a searcher
from Central European University in Atlanta, GA, USA
According to most recent research published by Pepperdine University titled "2021 Private Capital Markets Report", the deals pursued by search funds generally span $0.5M to $5M with purchase multiples ranging from the lowest of 4x for small deals up to 7-8x for the larger deals in the few millions. You should consider your range of EBITDA according to how much leverage relative to purchase price (debt multiple) you can sustain as well as what purchase multiple would be advantageous for your specific purpose (tuck-in, add-in, traditional buyout etc.)
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