Typical purchase multiples in search funds

by a searcher from Carnegie Mellon University - Tepper School of Business

5 years ago

I know it all depends on the specific industry and deal at hand, but I'm curious to get this group's view on average/median purchase multiples for searchers. 

I started off reading the HBR guide to buying a small business and they are pretty strong on the 3x-5x EBITDA multiple range, with an average of ~4x for deals completed by searchers.

https://hbr.org/product/hbr-guide-to-buying-a-small-business/14156E-KND-ENG

I then read the Stanford 2018 Search Fund study (which appears to be more rooted in data, or at least they present the data) and they show a median multiple that hovers around###-###-#### 0x over the years.

https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/469696

Is this just a difference in the self-funded model versus the traditional search fund model versus where the former is targeting smaller businesses and therefore smaller multiples? Or something else that I'm missing?

31 likes
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40 comments

investor from McGill University

You may want to consider referring to the BVR data on this site - https://www.searchfunder.com/bvr/search

1 day ago | like reply | 0 likes

searcher from ESADE - ESADE Business School

Reports are very useful and of course depends on the market. But I would say that 4to 6x is what the market is seeing, depending a lot on (1) repeat nature of customers and (2) growth

1 day ago | like reply | 0 likes

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