Medical devices - high multiples (>7x)?

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June 03, 2024

by a searcher from INSEAD in Toledo, OH, USA

I'm talking to a medical device manufacturer with Revenue ~$4M, EBITDA ~$0.6M, and no growth since###-###-#### the company is >20 years old). The retiring owner is seeking a multiple of 7-8x and claims to have recently rejected an offer from a Strategic buyer in that range.

Are multiplies on medical devices companies typically above the 3-5x one would expect on other small businesses with this revenue and margin? What exit multiple might be expected if the business were twice as large (i.e. $8M Revenue and $1.6M EBITDA)?

p.s. I can't trust the competing "offer" was real. More likely there was interest, the seller stated the 7-8x multiple price, then the seller walked away from the potential buyer (a strategic) due to a personality clash. Whether that potential buyer agreed with the price is unclear.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Great question. I cannot speak on your specific transaction, but I have had a number of clients loose out on deals to strategic buyers that have dropped lower into the market then has usually been the case. However, if I am reading your post right at the EBITDA was only $600,000, it seems unlikely a strategic would drop down that low. Usually they are looking for $1 million at a minimum and usually $2 million or more in adjusted EBITDA. At $600,000 to pay that type of multiple, they would really have to think they have demand with their other clients to quickly grow the business to be worth that type of multiple. Just my two cents.
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Reply by a professional
from Southern Oregon University in Portland, OR, USA
With DealStats you could search by industry code 3841 pulling the individual private transactions for businesses that sold and compare your observations of these deals with your client's business. Looks to be 15 transactions within the last two years. You can review the details putting together your own professional judgement.
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