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Are Valuation Multiples Meaningful or Murky?

August 27, 2019

We’ve heard so many stories over the years from owners and executives who have heard bankers say a company’s valuation multiple should be “eight times earnings before tax, depreciation and amortization (EBITDA),” while their accountant said it might go “as low as six times EBITDA” in the industry. This game of phoning an "informed friend" may at first sound helpful to the individual gaining data points, but to us this information on its own can be quite murky or even useless if the context of the multiple is within M&A deals. This problem requires reasonable attention to deal structure. Read more at AccountingWeb.