Business Valuation Multiples by Business Size and Industrial Sector

                                      Business Valuation Multiples by Industrial Sector

I recently read some very interesting information in an article from Pratt’s Stats.  The article contained charts showing business valuation multiples broken down by size of business, as a multiple of Net Sales, Seller’s Discretionary Earnings, and EBITDA – over the past 15 years.  And there are charts showing median valuation multiples per sales in 2016 for businesses in eight major industrial sectors, plus all industries as a group. Finally, there’s a chart showing the 2016 valuation multiples per SDE for the eight major industrial sectors, plus the median operating profit margin for the same industrial sectors, plus all industries as a group.
 
The Pratt’s Stats database includes over 26,714 transactions in which a privately held company was sold to either a private or public buyer.
 
While all this information is interesting, all the numbers provided are just averages.  Every business is unique, and has differences that make it more or less attractive than the average business to potential buyers.  It takes a trained M&A professional, or a professional independent business appraiser, to advise a business owner who is interested in learning the value of his or her company.
 
Here’s a brief summary of some of the information contained in this article:

 

 

                            Summary of Charts

 
          Median Valuation Multiples                          by Net Sales Range Median Valuation Multiples by Sector Median-by Sector – 2016            (All Buyers)
 201520162017   201420152016  

MVIC/SDE

Operating    Profit  Margin
Revenue      MVIC / Revenue 
Sector
      MVIC / Sales                 Private Buyers 
$0-$1M0.460.480.57 Agriculture, Forestry & Fishing0.550.510.57 1.7518.0%
$1M-$5M0.400.460.45 Construction0.420.440.46 2.459.0%
>$5M0.540.580.48 Manufacturing0.520.540.58 3.057.0%
  

        MVIC/SDE

 Transport, Communication, Electric & Gas0.600.700.75 2.509.0%
$0-$1M2.122.032.12 Wholesale Trade0.410.370.39 3.056.0%
$1M-$5M2.792.913.24 Retail Trade0.340.340.35 2.107.0%
>$5M3.623.563.58 Finance, Insurance & R/E0.690.910.74 2.3515.0%
 MVIC/EBITDA Services0.550.490.55 2.109.0%
$0-$1M2.782.863.69 All Industries0.470.450.48 2.359.0%
$1M-$5M4.334.275.42        .
>$5M5.196.254.30         
                                                                                                          NOTES:
                                                          MVIC: Market Value of Invested Capital aka Sales Price of Business
                                                                          SDE:  Seller’s Discretionary Cash Flow
                                                     EBITDA:  Earnings before Interest, Taxes, Depreciation and Amortization

 
 
If you’d like to read the entire article, click HERE, or copy and paste this link on your browser:  https://www.dropbox.com/s/10c51mrzfp11nst/Pratt%27s%20State%20Update.pdf?dl=0
 
 

The Summit Acquisitions Group — Business Brokers and M&A Advisors — specializes in the sale, appraisal, and financing of privately owned companies ranging in valuation from $750,000 to $25,000,000. Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.