The Pepper Private Capital report was recently released. I’ve saved you the trouble and ploughed through it!
I personally wouldn’t want to rely on it for valuation inputs (its US based anyway) but it might be an interesting sanity check (or not!). These are the bits that stand out for me:
- private equity groups indicate their demand is up (good oh!)
- the largest number of transactions are in the $1m to $5m valuation range
- their preferred valuation (pricing?) method is EBIDTA multiples (60% of valuations!)
- average EBITDA multiples range between 3.0 for under $1m EBITDA and 5 times EBITDA between $1m and $25m
- average time for an exit 5 years
- favourite method, DCF
- favourite multiple, recast EBITDA
- Discount for lack of marketability between 11.9% and 18.8% for controlling interests (revenues of $25m and $100k respectively)
- Company specific risk premiums 3.0% to 4.6%
- Median Sellers’s Discretionary Earnings (SDE) multiples (EBITDA before owner’s salaries) range between 2.8 tor SDE 500k to $1m and 3.3 times for SDE $1m to $2m
- EBITDA multiples range between 3.0 on EBTDA of 500k to $1m and 4.3 on EBTDA $1m to $2m
- number one motivation for buyer — buying a job
- number of months from listing to close, between 7 and 12 months
- reasons for selling: retirement, new opportunity and burn out!
Simon is an accredited business valuer and specialises in valuing private businesses for parties involved in disputes, business buyers or sellers seeking to transact and business owners raising finance or restructuring.