Valuation Benchmarks for a $2M EBITDA CPG

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by a searcher from Oregon State University
in San Francisco, CA, USA

4mos ago

Valuation Benchmarks for a $2M EBITDA CPG

Hi everyone, I’m currently looking at a CPG target and wanted to get a quick "sanity check" from the community on valuation expectations. The Profile: EBITDA: ~$1.7M - $2M range. Margins: Strong 25%+ EBITDA margin (Asset-light). Concentration: One major retailer >80% of revenue Given the high margins but the heavy customer concentration, what's a realistic multiple range in the current market? Are you seeing deals like this close at 4x-5x? Any insights from those active in the CPG space would be greatly appreciated. Thanks!

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reply by a searcher 4mos ago
from Cleveland State University in Akron, OH, USA

Its not about valuation, its about structure. You have to tie the deal to that client sticking. Also, that EBITDA% is really not sustainable. The only reason you're seeing that is because of the simplicity of the customer concentration. A more robust business would drive SG&A (and ads/marketing) higher.

reply by an intermediary 4mos ago
from University of Western Australia in London, UK

Broadly speaking yes, this is not an unreasonable multiple for a great business in this sector. However, structure matters (i.e. how much is in cash, how much deferred, etc). And there is a lot that goes into determining whether this is a "great" business (and worth this multiple), beyond what you've described above. I wouldn't be alarmed by the strong margins, they are a good thing. We've seen CPG businesses maintain >25% net margins at 10x this scale (not that this is the norm of course). The devil is in the detail. We are specialists in this area. Happy to help if you want advice.