Multiple
What It Means
In the context of an Acquisition, the term Multiple refers to the ratio between Enterprise Value and some objective financial metric, such as revenue or EBITDA. For example, a 6x EBITDA Multiple with an EBITDA of $3 million would imply an $18 million Enterprise Valuation.
Why It’s Important
Multiples are an extremely common measure used in the valuation of all different kinds of companies because they are quick and easy to use. Companies with a given set of characteristics will typically have a valuation that falls within a small range. However, that range can change over time depending on the company as well as the broader economy, so having advisors who are up to speed on the current state of the market is incredibly valuable.