EBITDA multiple

From ACT Wiki
Jump to navigationJump to search
The printable version is no longer supported and may have rendering errors. Please update your browser bookmarks and please use the default browser print function instead.


A method of entity business valuation which is based on:

(i) Accounting Earnings before interest, tax, depreciation and amortisation (EBITDA) and
(ii) The ratio of entity value to EBITDA of a comparable business (or a comparable group of businesses).

EBITDA multiple = Total value of firm ÷ EBITDA.


For example, the total entity value of Company A is $750m and its relevant EBITDA is $150m.

Company A's EBITDA multiple:

= $750m/$150m

= 5 times.


The EBITDA multiple can also be used as a very simple comparison or estimation model, for corporate valuation.

In another case, say 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.

See also