Yearly Weightings for EBITDA multiples

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March 13, 2025

by a searcher in Illinois, USA

I'm curious how banks and advisors are weighting 3 years past performance for calculating multiples? I.e. 60% most recent year / 30% year -2 / 10% year -3? Is there a rough go-to metric or does this vary considerably deal-by-deal?

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Reply by an intermediary
from Eastern Illinois University in Mequon, WI, USA
Valuation multiples are merely a quick short-hand method for a future prophesy. If the past is "lumpy" all the more reason to focus more careful future projections, the best driver of true value.
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Reply by an intermediary
from Northeastern University in Acton, MA, USA
Good question Mark and not a simple answer. Believe it varies by industry, size of business and financial history. In the language/localization industry, if the revenue and profit is consistent, then the three years are weighted the same. Ebitda multiples vary depending on the revenue of the company. When revenue is up and down, you need to understand why and then take that in consideration. If revenue is growing for multiple reasons, then you would weigh the most recent year more heavily 50-70%.
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