How do you consider EBITDA multiples for Self Funded searches?

by a searcher from The University of Michigan - Stephen M. Ross School of Business

4 years ago

Adjusted EBITDA usually takes out the current CEO/Owner's salary and adds back a nominal salary at a low end. When you offer to the sellers and go for financing with banks (SBA loans etc.), do you take out your salary (higher than nominal salary assumed by seller) and give them valuation based on your adjusted EBITDA? I keep hearing 3-5x multiple and curious how self funded searchers do it.

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intermediary from Clemson University

4-6x adjusted EBITDA is the historic range for the majority of businesses but is heavily weighted towards the low-end currently due to inflationary and interest rate factors.

4 months ago | like reply | 0 likes

searcher from University of Texas at Austin

3-5x makes a lot of sense for a business that is fairly stable, higher multiples require a higher growth rate to make sense. Having said that, EBITDA is only a good proxy for cashflow in businesses where capex and working capital requirements are minimal.

6 months ago | like reply | 2 likes

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