M&A Glossary: Multiple

A multiple is a way to measure how much a company is worth. If a company has $2 million in EBITDA and it sells for $10 million, we say it sold at a “5 multiple.” Multiples are used as a valuation tool by analyzing the multiple similar companies obtained in a sale.

For example, if a similar business sold in your industry for 6x EBITDA, valuation analysts will use that as an indicator in predicting what your company could sell for in the open market.

Do you have friends who’ve shared their multiple with you? Convinced your business will earn the same? Be sure you’re not comparing apples to oranges. We can help.

For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.