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04/01/2021 Redacted Redacted

searcher University of Virginia-Darden - Darden School of Business Virginia Commonwealth University - School of Business

All, did multiples of purchased small businesses move up in the last year as a result of all the money printing the Fed did? I haven't noticed too much difference but wanted to get a sense of what others are seeing or know.

2 likes 212 views 10 comments

investor University of Virginia University of Florida - 04/02/2021

What seemed "normal" at 3-4x (EBITDA) a few years ago now seems normal at 4-5x...but just anecdotal from what I'm seeing down here in FL

like reply | 1 like

searcher California State University, Stanislaus - 04/02/2021

Many variables, but yes we have witnessed 3.5x EBITDA asking for 4.8x now

like reply | 0 likes

searcher La Sierra University - 04/02/2021

Yeah, I don't have any hard data but "feel" like they have definitely moved up.

like reply | 0 likes

intermediary New York University - 04/03/2021

All the money printing the federal government did should have lowered multiples since the effects should be considered temporary. That may be offset by stock market multiples of course.

like reply | 0 likes

intermediary Boise State University - 04/03/2021

While it might seem like multiples change over time, in small business sales, the data shows a different story. Multiples tend not to vary much. What changes are the earnings that are applied to the multiples. Thus the values change because earnings change. My comments are based on my observation and from the analysis by Jack Saunders, founder/owner of BIZCOMPS data base of sold businesses. In the 2020 User Guide, he states: "...over time, there is very little difference in the ratios, part

like reply | 2 likes

professional University of Aberdeen - 04/03/2021

Multiples have remained similar but easier to negotiate them down!

like reply | 1 like

intermediary Boise State University - 04/03/2021

You may be right!

like reply | 0 likes

searcher The University of Michigan - Stephen M. Ross School of Business University of Michigan - Ann Arbor - 04/04/2021

Great point!

like reply | 0 likes

searcher Harvard University - Harvard Business School Dartmouth College - 04/10/2021

I feel how Sam feels — anecdotally, seems like multiples have creeped up in the last few years. I think it’s only partly due to the recent fiscal policies (e.g. getting SBA to pay 6 months of your loan payments certainly doesn’t hurt), I also think a big reason is the growing prevalence of EtA in general, thanks in part to top B-schools all pushing curricula and resources to advance EtA, and great platforms like this one that help make the information accessible. Even pandemic

like reply | 0 likes

searcher The University of Chicago - Booth School of Business - 04/10/2021

I would attribute it more to interest rates than anything else. That discounted cash flow of future cash is now more valuable. The terminal value is much higher. etc. As such the present value of the business and thus multiple is up.

Another aligned factor is that investors basically no longer have a risk free return option, so the required IRR is much lower than in the past. Firms can raise lots more money with expectation for lower returns. When you can raise money with out needing la

like reply | 1 like

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