EBITDA multiple: Difference between revisions
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Revision as of 14:58, 23 October 2014
1. A method of business valuation which is based on accounting Earnings before interest, tax, depreciation and amortisation (EBITDA) and the ratio of entity value to EBITDA of a comparable business (or a comparable group of businesses).
EBITDA mulitiple = Total value of firm ÷ EBITDA.
2. For example if the total entity value of Company A is $750m and its relevant EBITDA is $150m, the EBITDA multiple = $750m/$150m = 5 times.
3. In another case if comparable EBITDA multiples for an unlisted Company B are 6, and its relevant EBITDA is $30m, the total entity value of Company B's business can be estimated on this basis as 6 x $30m = $180m.
