Typical purchase multiples in search funds

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by a searcher from Carnegie Mellon University - Tepper School of Business
in Boston, MA, USA

6yrs ago

Typical purchase multiples in search funds

I know it all depends on the specific industry and deal at hand, but I'm curious to get this group's view on average/median purchase multiples for searchers.

I started off reading the HBR guide to buying a small business and they are pretty strong on the 3x-5x EBITDA multiple range, with an average of ~4x for deals completed by searchers.

redacted

I then read the Stanford 2018 Search Fund study (which appears to be more rooted in data, or at least they present the data) and they show a median multiple that hovers aroundredacted0x over the years.

redacted

Is this just a difference in the self-funded model versus the traditional search fund model versus where the former is targeting smaller businesses and therefore smaller multiples? Or something else that I'm missing?

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reply by a searcher 1yr ago
from ESADE in Barcelona, España

Reports are very useful and of course depends on the market. But I would say that 4to 6x is what the market is seeing, depending a lot on (1) repeat nature of customers and (2) growth

reply by an investor 1yr ago
from McGill University in San Diego, CA, USA

You may want to consider referring to the BVR data on this site - redacted