During a sale process, there’s always one thing that’s top of mind: valuation.

For both buyers and sellers, coming to an agreement on the appropriate business valuation is ultimately what determines if a deal process will continue or not. Because of this, it’s so important for business owners to understand how prospective buyers determine a business’s value.

Two of the most important factors when exploring valuation are EBITDA and EBITDA multiples. 

• EBITDA is earnings before interest, taxes, depreciation, and amortization. Essentially, it’s a clean snapshot — measured before any deductions, taxes, financing, and non-operational factors — that a buyer can use to understand a business’s core profitability at a specific point in time. 
• EBITDA multiple represents how many times your business’s earnings are multiplied to determine its total value. It reflects your business’s current condition and its industry’s broader factors, such as financials and buyer demand. 

There is no set multiple in an industry, so it’s important to explore a variety of recent EBITDA multiples in your sector to determine a range for your industry. You can then set expectations for potential minimum and maximum valuations.

It’s also important to note that there are a variety of factors that can change your EBITDA multiple, which we dive into deeper in this article. 

To explore other deals in your industry, check out our new Winning LOI Hub, which highlights the EBITDA multiples from a select set of 100 deals across a variety of industries. In addition to multiples, you’ll be able to learn more about how these deals were structured and what types of buyers acquired each business. 👉  Visit The Winning LOI Hub

For over two decades, this company has become a trusted partner for the pharmaceutical and biotech industries, specializing in automation, integration, and validation services. With expertise in FDA regulations and industry standards, the business delivers solutions that enhance operations and ensure compliance in regulated environments.

The owner, nearing retirement, is seeking a buyer with industry knowledge to maintain operations and build on the company’s established reputation. Axial is assisting in connecting the owner with the right successor to ensure a seamless transition and future growth.