Parameters for higher multiples

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by a searcher from Western Governors University
in St. Louis, MO, USA

2yrs ago

Parameters for higher multiples

Hi all!

Are there any market standards for multiples in terms of growth? Everything I've read says 3-4x multiples aside from tech and they can be above that with consistent long term growth? The reason I'm asking is I'm seeing multiple deals at +4.5x with minimal seller financing meaning nowhere near even 10-20%. Are these just factors of the current market? Or are the brokers over listing the price knowing they'll be negotiated down? In that same breath, is there a reason for lower seller financing? As a searcher it makes me nervous with minimal seller financing as this is a sign the seller may not be confident in long term sustainability. Thank you!

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reply by a lender 2yrs ago
from University of Missouri in Denver, CO, USA

Hi Nick, looks like you got a ton of good responses here. As an SBA lender I agree that the seller avoiding seller carryback can be a cause for concern. The multiple of the deal being over 4x may be difficult to secure funding for. Please reach out if you'd like to discuss further.

reply by a searcher 2yrs ago
from Vanderbilt University in Cincinnati, OH, USA

Go to redacted. Look for industry research in the Resource Center. Download the 2023 Q4 Market Pulse. This will give you real median multiples by size from the quarter.. Notice you only get to a 4x multiple on the EBITDA businesses. This means the business has mgmt in place and no additional supervision should be needed. Using SDE with a multiple gets tricky because you are essentially buying yourself a job and not getting the appropriate return on any funds you personally invest.