Navigating seller multiples while rates are rising

by a searcher from Saint Louis University

11 months ago

As I've looked at different opportunities within my region, the consistent theme has been the asking price just doesn't pencil with typical leverage used in search deals even for companies with EBITDA in the $1M range. Is anyone else seeing this and if you are/have, what was your solution to this whether it be negotiating a more suitable selling price or other deal structure?

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searcher from University of Auckland

Hi Josh, what sort of multiples are you seeing in your region? I am looking at a number of opportunities in the 4x multiple range, but with where our borrowing costs are, the forecast period to pay back all bank borrowing and acquisition capital is generally in the 8-10 year range. I have not seen multiples come down enough yet to compensate for the increased costs of borrowing. I suppose the options are to find deals with love multiples/EVs or try to use other mechanisms (i.e. vendor financing at lower interest rates) to make the deal add up? Discounted cashflow valuations may play a role here too?

11 months ago | like reply | 0 likes

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