Valuation Guides
December 27, 2019
by a searcher from Stanford University - Graduate School of Business in Cupertino, CA, USA
How do searchers find comparative EBITDA multiples? Is there a pitchbook like source for lower mid market PE activity?
in Los Angeles, CA, USA
We use Free Cash-flow to Invested Capital.
As for private companies depending on industries for the most part sell around the multiples of 1.5x-4.5x FCF.
One very important thing, is your offer is based on the owners needs. Is it time or is it money? The more money he wants up-front the less he gets overall, less money he wants upfront the more he gets overtime. And I'm reffering to seller financing.
Brokers are very fixated on EBITDA as they are able to sell for an inflated price. If you want to make your investment work reach out to business owners and buy off-market. I don't deal with brokers, they are sleazy salesmen. I have Ex-Big 4 on my board and they all said FCF is the way you evaluate alongside everybody else who's high level financial guy that I speak to and roll-up experts.
from St. Vincent College in Pittsburgh, PA, USA
Other resources in addition to those mentioned -
Scope for healthcare specific deals. Extremely detailed.
GF Data - Does not have specific deal comps but it focuses on lower middle market and gives multiples by broad sector (i.e. healthcare services, business services, retail, etc), size, year, buyer type (PE vs family office), platform vs add-on, debt leverage, and more. Great info.