10 useful things to know about EBITDA multiples

October 13, 2026

Many people believe that EBITDA multiples are the best way to establish a valuation, but are they right?

This week we thought it would be helpful to share a few key thoughts around EBITDA multiples given that so many people see it as the first port of call for a private company valuation  That is not to say we agree that it should be the first port of call and it definitely should not be the only one. There are many ways of valuing a business, each situation is unique and requires a bespoke approach. We will reserve that discussion for an email, another day.

Nonetheless, we hope these 10 useful comments will help you better understand EBITDA multiples.

1. Very high multiples are for rare and exiting companies; most companies will sell for between 3x and 8x EBITDA. This is not because of anything intrinsic about the nature of valuation, it is because most buyers want to get payback on the cost of buying the business and at these types of multiples with a bit of cost cutting and maybe the use of leverage, buyers have the best chance of achieving that target There are other factors too that influence price of course so don’t imagine this is the only issue for a buyer!
2. Tiny companies will tend to command a lower multiple than a larger twin.  This is because it is harder to sweat a smaller company. The exception to this rule is when a tiny company has a LARGE opportunity to exploit.
3. You will get a higher multiple if you are in a healthier, stronger or larger part of your market  than a twin company which may at first glance appear to be the same. This can include when a company operates in a larger geographic market than its twin based elsewhere.
4. Lower profit margin, lower growth and smaller companies will tend to achieve a lower multiple than higher profit margin, higher growth and larger companies. The message for all business owners is not to stint on ambition to grow profits whenever and wherever you can if you want to achieve a higher exit multiple.
5. Multiples of 8x-14x EBITDA are most likely to be found for companies where the buyer can scale the product the target company sells by adding it onto the buyer’s existing product suite.  Higher multiples still are all about unicorns and decacorns where the market opportunity is immense and deals are about deeply strategic moves.
6. There are always exceptions to the rule: small companies with amazing IP (including branding and trademarks) or very cash generative companies, and companies with a strategic asset (which could include people or customers) that others really need or want, can be more valuable than you might think. Occasionally a bidding war will push up the price for a transaction, but beware using outlying EBIDTA multiples where this has been the case in a “normal” valuation exercise for something like employment related securities.
7. Relevant private comparable transactions are so important when trying to establish the EBITDA multiple for a private company or (subsequently) a shareholding, but don’t forget there are many other factors that also influence a valuation and every situation is unique to the day you value – even for the same company, so don’t be tempted to short cut the data analysis or the argument, even if it appears “obvious” You would be surprised how often there are very few direct comparables upon which you can rely,
8. Using EBITDA multiples from quoted companies needs careful handling, especially where the quoted companies are quanta larger that the company being valued. You will probably need to adjust the multiple to compensate for the delta in size between the two.  Beware also of EBITDA multiples derived from other listed companies in other countries – again adjustments may be needed.
9. Watch out for how EBITDA is computed, especially in companies where the directors/shareholders use dividends to draw income. You may need to make adjustments to EBITDA to ensure that management costs are properly reflected.
10. The usual calculation is enterprise value divided by EBITDA to get the multiple that will be applied. Remember that will give you an EV valuation. You then have to adjust for cash and debt to get an equity value.

We hope this email has been helpful. If you have a valuation on your desk where the obvious is not the answer, do give us a buzz. We would be delighted to assist.

Whether you have what appears to be the most straightforward “EBITDA valuation” or something technically difficult, we would be delighted to assist you and your client.  Just call or email us anytime.