What can the DealStats Value Index Digest tell us about valuation multiples?
March 26, 2025
Multiples-based methodologies are key to the work we do, particularly when we are unable to perform a discounted cashflow valuation.
We use a range of valuation multiples including:
- EV/Revenue
- EV/EBITDA
- EV/EBIT
There are also some circumstances where we can use weighted averages and Seller’s Discretionary Earnings’ multiples to ensure we are capturing an accurate reflection of a Company’s value, although that is a mailer for another day!
As multiples-based methodologies produce relative rather than intrinsic valuations, the quality of data inputs is paramount. If non-comparable transactions or companies are used, the results can be inaccurate and, ultimately, open to challenge.
I am a subscriber to DealStats, which publishes a quarterly review of information regarding valuation multiples and profits for transactions across sectors and time for both public and private companies.1
One thing that stood out from their recent review of data pertaining to Q4 2024 is that valuation multiples are, on average, lower than many might perceive them to be. Whilst they may grab headlines, acquisitions at very high multiples are the exception rather than the rule.
Only yesterday, it was announced that Roper Technologies plans to acquire “healthcare technology company CentralReach from Insight Partners for about $1.65 billion”.2 CentralReach is expected to “contribute about $175 million to revenue and $75 million of [EBITDA] for the 12 months ending June 30, 2026.”3
This transaction has an implied EV/Revenue multiple of 9.43x, an implied EV/EBITDA multiple of 22.00x and generated ~16,800 Google search results when I had a quick look earlier.
DealStats’ data, however, paints a very different picture with an average EV/EBITDA multiple of 3.50x, in Q4 2024. This is in line with our experience that acquirers typically want to receive payback on their investments within 2 – 3 years. Although it must be said that the dynamics of transactions differ in each case. Acquirers may apply a premium for any number of reasons, including, for example:
- The outsized growth opportunities of the target,
- To prevent the target from disrupting its own market position,
- The intellectual property assets of the target,
- The synergies between themselves and the target.
Multiples also differ significantly from sector to sector. In the last 12 months, median EV/EBITDA multiples range from 2.50x for Accommodation and Food Service businesses and 3.10x for Other Services businesses to 9.10x for Finance and Insurance businesses and 34.90x for Information businesses.
These differences illustrate just how important it is to really understand a company and its operations before even beginning to collate valuation multiples data.
Although they have their limits, multiples-based methodologies are an incredibly useful tool both in the value they uncover and the value they don’t, which can sometimes be just as helpful!
We always examine the results of every multiples-based methodology in order to understand the potential intangible value that may (or may not) have been uncovered.
While not always as immediately apparent, this intangible value is no less real. Conversely, it is also important to consider the risks that might not be reflected in the results of a multiples-based methodology.
We take pride in being “in the trenches” with our clients in order to be able to articulate all of these intangible factors as they know their businesses best and always provide incredibly valuable insights.
If you have any clients that would benefit from a thorough, independent valuation explained clearly in plain English, please do get in touch.
1 https://www.bvresources.com/dealstats-value-index
2 https://www.reuters.com/technology/roper-technologies-buy-centralreach-165-billion-2025-03-24/
3 https://www.reuters.com/technology/roper-technologies-buy-centralreach-165-billion-2025-03-24/
