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M&A Talk (Mergers & Acquisitions), by Morgan & Westfield
For Sellers: Mastering EBITDA Multiples
Oct 10, 2024
In this insightful discussion, Kevin Moyer, an expert in business valuation and M&A, dives into the critical world of EBITDA multiples and their pivotal role in company valuation. He explains how these multiples vary by industry and the importance of accurate adjustments. The conversation touches on the influence of Capital Expenditures on EBITDA, the need for recent market data, and how net working capital affects purchase price calculations. Moyer also emphasizes the common pitfalls to avoid for sellers aiming to maximize their business value.
32:28
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Quick takeaways
- EBITDA multiples provide a straightforward method for valuing companies by measuring enterprise value against adjusted EBITDA, reflecting ongoing performance.
- Accurate data is crucial in using EBITDA multiples, as discrepancies can lead to significant underbidding or overbidding during M&A transactions.
Deep dives
Understanding EBITDA Multiples
EBITDA multiples serve as a key financial metric in mergers and acquisitions, measuring a company's enterprise value against its EBITDA. This approach can utilize reported EBITDA or adjusted EBITDA, which accounts for one-time expenses and other modifications to better reflect a company's ongoing financial performance. The use of multiples allows for a comparative analysis against historical transaction trends within specific industries, providing a benchmark for valuing companies during negotiations. Ultimately, establishing a solid understanding of these multiples is crucial for both buyers and sellers to set realistic expectations in the market.
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