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May 31, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
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+Bonus: Get 27 financial modeling templates in swipe file
All depends on the industry, companies size (Enterprise value), and to some extent the direction of the industry as a whole.
An excellent EBITDA multiple is any multiple higher than your entry multiple
I don't agree, if you come in at a 2X EBITDA does it mean you must sell at 10X EBITDA even if the earnings at your exit are higher than at your entry?
SECOND QUESTION: Why do we pay EBITDA multiple instead of using DCF as a value to pay?
Use a DCF to back up your EBITDA multiple
I am looking at the Mining industry.
I think a good multiple here would be 6 (for entry) and 8 (for an exit)
Actually we are looking at buying an asset and we are trying to anticipate an earnings multiple that the owners will want. The asset had been loss making for a while, only being able to pay their first dividend this year of 6mn USD
An excellent exit multiple would be at minimum one that reaches your target return as marketed to your investors. It will vary based on how the exit EBITDA has grown or shunk since the beginning and what your target return is. That doesn't even get into sponsor economics (excellent would be a multiple that gives you an enormous carry)
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