One of our clients recently received an investment offer which valued his company at over twelve times EBITDA. It was very comforting to know that great companies with a solid team and tremendous potential are still getting the attention and capital they need.
Of course, with that valuation you can probably tell it isn’t your normal 2009 company. They are in a hot field with high growth and real potential. The investment company (a blend of venture capital and private equity) is obviously not valuing the company on historical performance, but on the promise of future cash flow and resale value.
It is also interesting that a strategic buyer in a similar industry also made an offer but fell short. The rule of thumb is that a strategic buyer will pay more for a company, because of the additional synergies (i.e. more revenue or less cost somewhere in the organization). In this case that wasn’t true, we think because the strategic buyer didn’t really grasp the growth this industry is expected to have.