This latest information on the EBITDA valuation multiples comes to my office from DealStats Value Index Digest, which is one of our most authoritative resources.
The DealStats database contains the larger transactions where Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is the preferred metric for valuation purposes. For smaller transactions, Sellers Discretionary Earnings (SDE) is used more frequently. For the differences in the EBITDA and SDE metrics, please see our article here.
The average EBITDA valuation multiple across all industries, as reported by DealStats, has increased by 65 percent since its low of 2.9 in the first quarter of 2022.
There are several reasons for this strong rebound, and the two that immediately come to mind include the fact that the most predicted recession in American history for 2022 and 2023 did not happen. The television “talking head” economists were dead wrong.
The other reason is that interest rates are falling, and the Federal Reserve System has signaled that more decreases will follow.
The graph below from DealStats shows that the average EBITDA valuation multiple across all industries has rebounded nicely from the 6-year low of 2.9 to a 4.8 multiple as of June 30, 2024.
The valuation multiples in the balance of the business sectors are closer to the 6-year average across all markets as shown below.
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Other articles that may be of interest dealing with business valuation and ownership transfers can be found here in our resource center.
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William Bruce is an Accredited Business Intermediary (ABI) and Senior Valuation Analyst (SVA) assisting buyers and sellers of privately held businesses in the transfer of ownership. He currently serves as president of the American Business Brokers Association. His practice includes consulting services nationally on business valuation and ownership transfer issues. With offices in Fairhope, Alabama and Baton Rouge, Louisiana, he may be reached at (251) 990-5934 (Fairhope), 225-465-5799 (Baton Rouge) or by email at Will@WilliamBruce.org. The firm’s most recent closings can be viewed here.
