Consider this overly simplistic example:

A stable (not growing) business with $10MM in Rev and $4MM in COGS. Inventory lead times are 6 months, and orders are being placed every quarter ($1MM each time). EBITDA = $2MM. Industry multiples of EBITDA are ~3x. Inventory on hand = $3MM of which $2MM will sell in 1 year and 1 MM in the second year.


How would you value this business as a buyer? How would an appraiser/bank look at it?

I think an appraiser/bank might say: Valuation = 3x EBITDA = $6MM + Excess inventory ($1MM) = $7MM.


Thoughts?