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What are EBITDA Multiples?

Adjusted EBITDA is a term often used in mergers and acquisitions. EBITDA is defined as “earnings before interest, taxes, depreciation, and amortization.” It is the net income of a business plus interest, taxes, depreciation, and amortization added to it. Adjusted EBITDA “adds-back” expenses a current owner may run through a business that do not reflect the typical costs to support operations. Typical add-backs include expenses that: 1) may be unusual or linked to a certain event (like a bad debt write-off or expenses related to move the business); 2) are at the discretion of the current owner (for example, payments to a spouse or child that is not active in the business); or 3) compensation to an owner or family member that may be more than the cost to replace the duties performed by that person. Typically, historical figures for adjusted EBITDA are used as a proxy to reflect the income stream a business will generate in the future.

Why is adjusted EBITDA important? Because it is commonly used to calculate, or impute, the value that is being put on a business. Value is a product of multiplying adjusted EBITDA by an EBITDA multiple. Value = An Income Stream times a Multiple. Conversely, Value divided by an Income Stream (like EBITDA) = Multiple. This is the same concept as a price to earnings multiple in the stock market. However, in the world of mergers and acquisitions, adjusted EBITDA is the income stream commonly used to determine value.

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I’m Thinking of Selling My Company, How do I Value My Business

So, you are entertaining the thought of possibly selling your business. How do you know what it’s worth? There are a lot of factors that go into deciding an asking price for your company. The market, the industry, and the level of risk can all affect the final value. The following guide will walk you through a quick rundown of the valuation process for middle-market businesses and help you gain a basic understanding of what your company might be worth.

Step One: Have Your Finances in Check

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What Makes a Company a Likely Acquisition Target?

A fascinating report has been published by Intralinks who, in conjunction with Cass Business School in London examined 23 years of data from almost 34,000 companies worldwide to identify the factors that make companies attractive M&A targets.

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It was October Dealfest at Benchmark International!

October was a fantastic month for Benchmark International and we are proud to announce that our teams in the UK and US have completed deals with an overall, combined transaction value of $160,000,000.

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