Worth poking broker on an unrealistic multiple?

August 06, 2025

by a searcher from University of Washington in Seattle, WA, USA

I'm looking at the CIM for a business with an asking multiple that IMO is at least 2x market value (i.e. a 9x SDE multiple where similar businesses seem to be in the 3-4x range). It's been on the market for a while (looks like it was even posted here a while back and people scoffed at the asking price), and I think it's potentially a good fit for me but wouldn't pay above 3-4x for a number of reasons. Is it worth pinging the broker to probe how serious the sellers are about selling and whether they'd entertain an offer at a more standard multiple, or do you think I should just eat the time/expense of writing an LOI at a multiple I find reasonable and submitting it? I think a few weeks ago I'd have though "definitely just ask the question, what could it hurt" but have seen so much advice on here lately about not doing anything to kill deals pre-LOI that I'm questioning my intuition. What would you do? Thanks in advance for the gut-check!

Reply by a searcher
from University of Wisconsin in Los Angeles, CA, USA

Have a call with the broker to learn more, hear the seller's story, and reason for the listed valuation. It is standard to ask these things and more, so I wouldn't worry about it killing a deal. It is possible the broker and seller have unrealistic expectations or there is something missing from the CIM that would materially impact EBITDA (e,g, new contracts and EBITDA growth). If valuation expectations are unrealistic, I would tell them where you are shaking out and why. They may temper expectations due to lack of interest or if not you are still better off not doing a deal. I would not waste the time on an LOI if the valuation gap is too significant.

Reply by an intermediary
from Clemson University in Raleigh, NC, USA

You can't kill a deal thats never going to happen. Ask for an SBA pre-qual letter on the business from the broker. The Debt Service Coverage Ratio (DSCR) is going to impute a maximum bankable transaction value. Unless a buyer is willing to bring more to the closing table and/or the seller is willing to finance the excess, the deal will never get done. NOTHING sells at 9x SDE without intellectual property or some other VERY unusual attribute. Even with 100% contractual recurring revenue, that is an unrealistic (moronic) valuation.

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