EBITDA Multiples by Industry: Planning your Exit Valuation

8th July 2020

In order to convince and investor that your business is the one to back you need to paint a picture of what your company will look like on the day-of-exit. This, amongst other things, will include your exit valuation. This is vital information if an investor is to calculate what their shares will be worth and what return they will receive when the company is sold. In order to achieve this, you’ll need to know your exit multiple.

When it comes to calculating an exit valuation, the most common and basic formula that is used is Valuation = EBITDA x Multiple (sometimes EBITDA – or profit – is substituted for revenue).

The multiple is a variable figure and will be determined by an industry benchmark (which increases or decreases based on the underlying assets in your business – some of these assets are tangible; such as stock and equipment, others are intangible; such as brand, culture, systems and IP). To ensure your projections are attractive to an investor, you’ll need to ensure your profit allows for your business to be valued highly enough at the time of exit.

Knowing the exit multiple for your type of business and sector is vital. Without it, you’re unable to validate your financial projections and ensure you have a potential exit valuation that gives your investors a suitable return on their investment. Doing full valuation research to find a realistic and credible day-of-exit valuation can be challenging and time-consuming, the quickest and simplest approach is to research the EBITDA Multiple benchmark for your sector.

Thanks to Equidam, we’ve compiled a list of sector-specific multiples that you can use alongside your financial projections to determine your likely exit value. If using this method in an attempt to value your company as it stands today, you should use the final year of your projections and discount the figure accordingly.

Of course, this is just a very quick and simple method for calculating your startup valuation, we would always recommend you get a professional valuation report of your company completed before pitching to investors.

Use the table below to five the EBITDA Exit Multiple for your sector

Industry EBITDA Multiple
Advanced Medical Equipment & Technology 24.81
Advertising & Marketing 11.10
Aerospace & Defense 14.69
Agricultural Chemicals 11.48
Airlines 8.16
Airport Operators & Services 8.16
Aluminum 7.57
Apparel & Accessories 12.58
Apparel & Accessories Retailers 10.30
Appliances, Tools & Housewares 10.36
Auto & Truck Manufacturers 9.81
Auto Vehicles, Parts & Service Retailers 12.09
Auto, Truck & Motorcycle Parts 7.08
Banks* 20.56
Biotechnology & Medical Research 16.03
Brewers 15.54
Broadcasting** 8.76
     Other Broadcasting 8.46
     Cable Service Providers 9.66
     Radio Broadcasting 8.46
     Television Broadcasting 8.46
Business Support Services** 10.03
     Call Center Services 9.73
     Cleaning Services 9.73
     Commercial Educational Services 15.17
     Corporate Accounting Services 9.73
     Data Processing Services 9.73
     Exhibition & Conference Services 9.73
     Health, Safety & Fire Protection Equipment 9.29
     Industrial Design Services 9.73
     Industrial Equipment Rental 9.73
     Legal Services 9.73
     Maintenance & Repair Services 9.73
     Management Consulting Services 9.73
     Office Equipment & Supplies Rental 9.73
     Office Furniture 9.29
     Office Supplies 9.29
     Office Supplies Wholesale 9.29
     Pest Control Services 9.73
     Security Services 9.73
     Testing Laboratories 9.73
     Transaction & Payment Services 9.73
     Translation & Interpretation Services 9.73
     Other Business Support Services 9.73
     Other Business Support Supplies 9.29
Business Support Supplies 9.29
Casinos & Gaming 12.39
Closed End Funds 20.14
Coal 4.53
Commercial Printing Services 10.07
Commercial REITs 23.06
Commodity Chemicals 9.60
Communications & Networking 14.18
Computer & Electronics Retailers 10.30
Computer Hardware 11.76
Construction & Engineering 8.22
Construction Materials 10.75
Construction Supplies & Fixtures 8.55
Consumer Lending* 20.56
Consumer Publishing 10.07
Corporate Financial Services* 20.56
Courier, Postal, Air Freight & Land-based Logistics 10.47
Department Stores 11.22
Discount Stores 10.90
Distillers & Wineries 15.54
Diversified Chemicals 8.19
Diversified Industrial Goods Wholesalers 9.69
Diversified Investment Services 20.14
Diversified Mining 7.57
Diversified REITs 23.06
Drug Retailers 10.30
Electric Utilities 12.58
Electrical Components & Equipment 10.36
Electronic Equipment & Parts 10.36
Employment Services 9.73
Entertainment Production 19.03
Environmental Services & Equipment 13.46
Exchange-Traded Funds 20.14
Financial & Commodity Market Operators & Service Providers 24.35
Fishing & Farming** 13.69
     Agricultural Biotechnology 13.81
     Agricultural Consultancy Services 13.81
     Agriculture Support Services 13.81
     Animal Breeding 13.81
     Animal Feed 13.81
     Aquaculture 13.81
     Cattle Farming 13.81
     Coffee, Tea & Cocoa Farming 13.81
     Commercial Fishing 13.81
     Commercial Nurseries 13.81
     Fishing & Farming Wholesale 11.43
     Fur Farming 13.81
     Grain (Crop) Production 13.81
     Hog & Pig Farming 13.81
     Organic Farming 13.81
     Poultry Farming 13.81
     Sheep & Specialty Livestock Farming 13.81
     Sugarcane Farming 13.81
     Vegetable, Fruit & Nut Farming 13.81
     Other Fishing & Farming 13.81
Food Processing 13.72
Food Retail & Distribution** 9.75
     Beer, Wine & Liquor Stores 9.47
     Food Markets 9.47
     Food Wholesale 11.43
     Supermarkets & Convenience Stores 9.47
     Tobacco Stores 9.47
     Vending Machine Providers 9.47
     Other Food Retail & Distribution 9.47
Footwear 18.84
Forest & Wood Products 9.42
Gold 11.00
Ground Freight & Logistics 8.84
Healthcare Facilities & Services 12.00
Heavy Electrical Equipment 10.36
Heavy Machinery & Vehicles 12.21
Highways & Rail Tracks 10.91
Home Furnishings 10.93
Home Furnishings Retailers 12.88
Home Improvement Products & Services Retailers 12.88
Homebuilding 9.29
Hotels, Motels & Cruise Lines 12.39
Household Electronics 7.94
Household Products 16.10
Independent Power Producers 9.68
Industrial Conglomerates 9.69
Industrial Machinery & Equipment 12.21
Insurance Funds 20.14
Integrated Oil & Gas 6.77
Integrated Telecommunications Services 7.06
Investment Banking & Brokerage Services* 20.56
Investment Holding Companies 20.14
Investment Management & Fund Operators 20.14
Iron & Steel 5.92
IT Services & Consulting 11.79
Leisure & Recreation** 13.36
     Adventure Sports Facilities & Ski Resorts 13.36
     Amusement Parks and Zoos 13.36
     Golf Courses 13.36
     Guided Tour Operators 13.36
     Gyms, Fitness and Spa Centers 13.36
     Hunting & Fishing 13.36
     Marinas 13.36
     Movie Theaters & Movie Products 13.36
     Museums & Historic Places 13.36
     Professional Sports Venues 13.36
     Public Sport Facilities 13.36
     Theatres & Performing Arts 13.36
     Travel Agents 13.36
     Other Leisure & Recreation 13.36
Life & Health Insurance 8.85
Managed Healthcare 11.55
Marine Freight & Logistics 9.58
Marine Port Services 9.58
Medical Equipment, Supplies & Distribution 21.35
Mining Support Services & Equipment 7.57
Miscellaneous Specialty Retailers 10.30
Multiline Insurance & Brokers 9.05
Multiline Utilities 12.58
Mutual Funds 20.14
Natural Gas Utilities 12.58
Non-Alcoholic Beverages 17.58
Non-Gold Precious Metals & Minerals 11.00
Non-Paper Containers & Packaging 9.33
Office Equipment 9.29
Oil & Gas Drilling 9.45
Oil & Gas Exploration and Production 5.14
Oil & Gas Refining and Marketing 12.80
Oil & Gas Transportation Services 12.80
Oil Related Services and Equipment 9.45
Online Services** 19.63
     Content & Site Management Services 19.63
     E-commerce & Marketplace Services 19.63
     Internet Gaming 19.63
     Internet Security & Transactions Services 19.63
     Search Engines 19.63
     Social Media & Networking 19.63
     Other Online Services 19.63
Paper Packaging 9.33
Paper Products 9.42
Passenger Transportation, Ground & Sea 10.47
Pension Funds 20.14
Personal Products 21.35
Personal Services** 10.34
     Accounting & Tax Preparation 9.73
     Child Care & Family Services 9.73
     Consumer Goods Rental 9.73
     Consumer Repair Services 9.73
     Funeral Services 9.73
     General Education Services 15.17
     Personal Care Services 9.73
     Personal Legal Services 9.73
     Other Personal Services 9.73
Pharmaceuticals 14.50
Phones & Handheld Devices 13.09
Professional Information Services 25.30
Property & Casualty Insurance 10.56
Real Estate Rental, Development & Operations 9.45
Real Estate Services 17.02
Recreational Products 13.36
Reinsurance 13.22
Renewable Energy Equipment & Services 11.57
Renewable Fuels 11.57
Residential REITs 23.06
Restaurants & Bars 14.99
Semiconductor Equipment & Testing 17.31
Semiconductors 13.11
Shipbuilding 9.58
Software 24.35
Specialized REITs 23.06
Specialty Chemicals 11.48
Specialty Mining & Metals 7.57
Textiles & Leather Goods 12.58
Tires & Rubber Products 6.63
Tobacco 11.10
Toys & Children’s Products 13.36
UK Investment Trusts 20.14
Uranium 9.68
Water & Related Utilities 12.47
Wireless Telecommunications Services 6.81

*For these industries, a higher level business sector multiple is applied
**For these industries, a lower activity-based level is available

Source: https://www.equidam.com/ebitda-multiples-trbc-industries/

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2020-10-16T14:35:38+00:00July 8th, 2020|Categories: Advice, Investment|