Capital & valuation

Valuation multiples

Valuing a business as a multiple of a metric — EBITDA, revenue, ARR — taken from what comparable businesses sold for.

Owned by: Manager / DirectorTest band: Manager / Director

The formula

Enterprise value = EBITDA × Multiple

The multiple carries all the judgment. A 6× EBITDA business and a 10× one differ in growth, margin, and risk, not in arithmetic.

Two businesses have identical EBITDA. One trades at 5× and the other at 9×. The difference is most likely…
Before accepting a 7× EBITDA offer, the seller's CFO should adjust EBITDA for…