UK Business Values: EBITDA vs. Sale Price

The Deal Value Index is a meta analysis tool that tracks actual transaction values of companies sold in the UK, and plots these against the EBITDA of the acquired businesses, giving an idea of the achieved multiple.

This set of data covers an 8 month period from 1st Jan, 2025 to 31st August 2025.

Our sources include the Experian Market IQ database with around 500 trade deals and 100 private equity transactions; Dealsuite, who survey over 400 M&A advisory firms operating within the UK& I M&A mid-market; and BSR who maintain a live database of published deals in the mid and upper market and also store internal data on companies in the micro and small market who have transacted via the platform.

The x scale on our graph is set logarithmically to highlight the importance of the risk factor and the extent to which it applies across firms in inverse relation to their size. The smaller the business, the higher the risk, the lower the sale price as a multiple of net profit.

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Important
Whilst the graph does show a correlation between EBITDA value and sale price, this is not to be confused with a causal relationship, and consequently we strongly dissuade anyone from using it as such. In simple terms, this is not a valuation tool. It can be used as a guide by an experienced M&A expert to help inform the valuation process, who in most cases ought to be primarily concerned about risk-adjusted future cash flow.

Industry variation
There are very high levels of variation between industries, which are not evident here in this aggregated graph. For instance it is not unusual for companies in particular technology sub-niche sectors to be trading at 15-20 x EBITDA, or 3-5 x revenue. BSR members will have access to our industry-specific Value Indices, which will be available from November 2025.

Exit-readiness
These are sourced from actual transactions, where in most cases the sellers will have done a great deal of preparatory and de-risking work, covering financial, operational and legal aspects.

It is simply not realistic to suppose that a company that is not well down the exit planning route would sell for the same EBITDA multiple as a company here, given the same EBITDA. It would not have the same risk profile.

Upper and lower limits
The upper and lower spread is approximately one standard deviation from EBITDA levels of £500,000 up. Industry variation aside, the span between the upper and lower level is often attributable to one company having stronger transferable value - such as recurring revenue, diversified customers, scalable systems, and a capable management team - while the other relies heavily on the owner or lacks predictable growth. In essence, buyers pay a premium for lower risk and higher future growth visibility.

Earn-out exclusion
The deals do not explicitly include earn-outs or contingent consideration in transaction value calculations. Where methodology relies on publicly available financial information on deals, earn-outs are typically not disclosed as part of the initial transaction announcements. Where methodology relies on broker/adviser information, we ignore any earn-out / performance-related future consideration. Bear in mind that it is not uncommon for earnouts to result in between 20% and 40% being paid out at a future date.

This means the index reflects:
* Immediate consideration paid at closing
* Fixed enterprise values rather than total potential transaction value
* Valuations that exclude performance-based upside

The problem with reported EBITDA figures
Often ‘Reported EBITDA’ is not adjusted EBITDA.

As private companies are often owner-managed to at least some degree, reported, or disclosed profits tend to be suppressed by various expenses that may be non-recurring under a new owner.

To complicate matters, the business owner and the acquirer will sometimes disagree on the amount of the normalising adjustments, and following negotiation a new adjusted EBITDA will be settled on, and not revealed in public disclosures. The resultant multiple can therefore be markedly different to one calculated on reported figures.

Take a company with reported profits of £2,000,000 and a deal value (excluding any earnout component) of £10,000,000. Then our derived EBITDA multiple would be 5.

However, it turns out in this case that the normalised profits came out at £2,500,000.
The public is not privy to this information.

Therefore in reality the multiple will be 4, although it may ultimately advance if any earnout is eventually triggered.

Why is the difference between the upper and lower range so large for smaller businesses?
The risk premium is very case and company specific. The adjusted EBITDA of small companies is often unstable - it often fluctuates heavily in terms of percentages per year - and one single adjustment, like over or understated rent to the company charged by the owner or a non-market operator salary, can substantially change the net profit figure, so any multiple on that is highly volatile.

The simple truth is that small companies usually will typically not have a management team with depth, the owner is likely to be involved ‘in’ the company, rather than ‘on’ the company as an overseeing chairman. Very often this represents high risk, which translates into lower market multiples.