EBITDA Volatility and Pricing

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by a searcher from University of Connecticut
in West Newbury, MA, USA

1yr ago

EBITDA Volatility and Pricing

I am evaluating an HVAC purchase and it's had a jump in EBITDA in 2024, and I'm curious how to price it accordingly. For example, EBITDA went from $575k, to $625k, to $1.045mm in 2022, 2023, 2024 respectively.

Would you take a T3 blended approach and apply a relative multiple to it?

It does seem like there are valid changes in the business that have led to this, mostly from an efficiency standpoint, but it would be risky to only use 2024 for the purposes of valuation multiples.

Any advice would be greatly appreciated.

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reply by a searcher 1yr ago
from Bentley University in New York, NY, USA

I believe as a guideline SBA banks want to see a DSCR greater than 1.0 for previous years so I use that as a guide to what I can offer. I think you can also have your internal valuation methodology and then when it comes to communicating the multiple to the seller, choose based on which is more palatable and/or appropriate to anchor on for negotiating.

reply by a searcher 1yr ago
from University of Toronto in Vancouver, BC, Canada

Having lost bids previously by taking 3 Yr Averages, I would value it based on the latest year ( if you think that's sustainable ) and apply a market multiple to it , while making sure I have protections ( such as forgiveable seller note etc. ) In competitive industries/ situations, you might need to do this but if it's an off-market deal, for sure go with the 3 year average.