Q4 Private Deal Update
Want to know what your business is worth?
Check out this quarters summary of private deals compiled by Pratts Stats.
The free report provides general trend information on valuation multiples and profit margins for transactions so if your thinking about selling your business this year it is a must read!
When valuing a business, selection of the correct multiplier is critical to achieving an accurate well founded and justifiable valuation.
Some of the more commonly used acronyms for valuation multipliers include;
- Sellers Discretionary Earnings (SDE);
- Net Sales;
- Gross Profit Margins;
- EBIT; and
All multipliers are useful in different situations although it is beyond the scope of this article to detail there best uses. Often when selecting a multiple it is useful to evaluate comparable transactions across several types of multipliers. For example, if i was determining a suitable multiplier for a manufacturing business i would compare other business sale transactions on the bases of the actual sales price divided by both EBIT and EBITDA as then i would begin to understand the impact of depreciation and amortisation on the valuation. Given that most manufacturing businesses are capital intensive it is arguable that the an EBIT approach should be used as this form of multiplier is reflective of the earnings of the business after the cost of depreciation or necessary replacement of assets.
If you want to know more about the value of your business please get in touch.