M&A Talk: #1 Podcast on Selling a Business For New Sellers: Mastering EBITDA Multiples
Oct 10, 2024
In this insightful discussion, Kevin Moyer, an expert in business valuation and M&A, dives into the critical world of EBITDA multiples and their pivotal role in company valuation. He explains how these multiples vary by industry and the importance of accurate adjustments. The conversation touches on the influence of Capital Expenditures on EBITDA, the need for recent market data, and how net working capital affects purchase price calculations. Moyer also emphasizes the common pitfalls to avoid for sellers aiming to maximize their business value.
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Use Revenue Multiples For Pre-Scale Firms
- EBITDA multiples fit companies with established run-rate cash flow, not pre-scale startups.
- Kevin Moyer recommends revenue multiples for early-stage or pre-scale tech where EBITDA is absent.
When EBITDA Multiples Become Practical
- Apply EBITDA multiples when a company has scale and a stable run rate, often ≥$500,000 EBITDA.
- Kevin Moyer uses that threshold as a practical starting point for middle-market deals.
Adjusted EBITDA Cleans Up Reported Earnings
- Adjusted EBITDA removes one-time, discretionary, or non-recurring items to show economic earnings.
- Kevin Moyer notes sellers often engage quality-of-earnings work to substantiate those add-backs.