Strategic buyers often pay a premium for an acquisition, as much as 8X-10X Adjusted EBITDA. They may want to enhance their company by capturing market share, gaining access to new customers, obtaining technology and innovation, etc.
Using multiples of 8X-10X, a company with a $2.5MM Adjusted EBITDA might sell between $20MM to $25MM.
Financial buyers look for a good ROI (Return on Investment) and will try to push down the acquisition price for their own long-term gain. They often pay between 5X-6X Adjusted EBITDA. They are long-term investors and are looking for a well-managed company.
Using multiples of 5X-6X, a company with a $2.5MM Adjusted EBITDA might sell between $12.5MM to $15MM.
Private Equity Group (PEG)
Private Equity Groups (PEG) often provide capital for strategic growth. They normally offer 4X-7X Adjusted EBITDA. They often gain a controlling interest by contractual rights if they own less than a majority of the stock of the company.
Using multiples of 4X-7X, a company with a $2.5MM Adjusted EBITDA might sell between $10MM to $17.5MM.
Employee Stock Ownership Plan (ESOP)
Employee Stock Ownership Plan (ESOP) is an event where the employees of the company become the buyer. An ESOP is very complicated and the purchase price is sometimes 5X-6X Adjusted EBITDA.
Using multiples of 4X-6X, a company with a $2.5MM Adjusted EBITDA might sell between $12.5MM to $15MM.