Does a buyer want to pay a low or high EBITDA multiple?
An EBITDA multiple is calculated as enterprise value divided by EBITDA (likely from the most recent year or a forecasted EBITDA). A buyer’s goal should be to pay as low of an EBITDA multiple as possible. To understand what a reasonable EBITDA multiple is for the business a buyer is contemplating buying, the buyer should find analyze EBITDA multiples from recent transactions in the industry.
The visual below illustrates how an EBITDA multiple is calculated and how a buyer prefers a lower EBITDA multiple.
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