• Mon, Dec 02, 2024
  • Business Valuation Resources Shares Updated 3rd Quarter 2024 EBITDA Multiples
  • Eric_photo_with_awards
  • Key Takeaways from the DealStats Value Index as reported by Business Valuation Resources.  The full report can be accessed here:  EBITDA multiples plummet to 3.2x in Q3 2024
    1. EBITDA Multiples Trend: EBITDA multiples across all industries reached their peak in the 3Q of 2018 at 5.0x, then dipped to a low of 2.9x in Q2 of 2022. Since then, they have been trending upward, reaching 4.8x in the third quarter of 2024, until plummeting to 3.2x in the Q3 of 2024.

    2. Root Cause:  This is strictly my opinion, but I see three reasons why multiples were down in 3Q 2024: 

      • I believe uncertainty around the election has resulted in a more conservative approach from buyers. 
      • Economic malaise has constrained the investment pool and high interest rates have created less appetite for risk.
      • The banking industry has increased their Debt Coverage Ratios for business lending.

    3. The Positive News: The election is over and the financial markets have reacted positively to the result. The Fed has indicated further interest rate reductions in the future. My expectation is in light of more certainty around our governance, financial markets, and interest rates, the banks will loosen up their restrictions. This should improve the M&A market and respective EBITDA multiples in the near future.

    4. Industry Variations: EBITDA multiples vary significantly by industry. For example, industries like Information Technology and Corporate Financial Services tend to have higher EBITDA multiples compared to industries like Retail Trade and Food Services.

      • Information Technology Sector:  EBITDA multiples have soared in the past 12 months to 28.7x bringing the all-time median EBITDA multiple to 11x.
      • Finance and Insurance Sector:  EBITDA multiples have increased in the past 12 months to 9.8x bringing the all-time median EBITDA multiple to 7.5x.
      • Transportation and Warehousing Sector:  EBITDA multiples have increased in the past 12 months to 4.3x ringing the all-time median EBITDA multiple to 3.7x.

    5. Industries Seeing the Largest Declines:  Mining, Quarrying, and Oil & Gas Extraction declined from 8.0x to 5.5x, Professional, Scientific, and Technical Services declined from 5.7x to 3.4x, Health Care and Social Assistance declined from 5.0x to 3.2x, and Manufacturing declined from 5.9x to 4.6x.

    If you are interested in understanding the market value of your business, please do not hesitate to contact me at:

    Eric J. Gall
    [email protected]
    239.738.6227