Market conditions
What moves multiples when nothing about the business has changed
A business is not valued in isolation. The same accounts, presented to the same buyer in a different credit environment, support a different price. This page describes the mechanisms, not a forecast.
The cost of debt sets the ceiling
Most acquisitions above main-street scale are financed partly with borrowing. The buyer's model has to service that debt out of the acquired earnings, so the price a buyer can pay is bounded by what the debt costs. This is the single largest external influence on private-company multiples, and it operates regardless of how well the target is performing.
When borrowing is cheap
Acquirers, private equity in particular, can carry more debt against the same earnings. Competition for assets increases, processes attract more bidders, and multiples rise across the board. Sellers in this environment are frequently rewarded for businesses that are not, on their fundamentals, exceptional.
When borrowing is expensive
Debt service consumes more of the acquired earnings and buyer returns compress. Acquirers become selective, diligence lengthens, and offers come in lower to preserve the return. Quality is rewarded relatively more, because it is the businesses with predictable cash flow that still clear a lender's test.
Where the sector cycle sits
Every industry has its own weather. Being on the favourable side of a structural trend widens the buyer pool, and a wider buyer pool is what actually produces a competitive price.
Structural tailwinds
Cybersecurity and compliance-driven software have benefited from demand buyers regard as non-discretionary. Skilled home-services trades (HVAC, plumbing, electrical) have been an active roll-up target for private equity consolidators. Businesses that can evidence an AI-driven improvement in margin or product in their accounts attract attention; claimed AI capability that does not appear in the numbers does not move a price.
Structural headwinds
Traditional retail continues to absorb the shift to e-commerce, and legacy media faces declining audiences and advertiser spend. Neither makes a business unsaleable. Both narrow the buyer pool, and a narrow pool shows up as a lower multiple and a longer process.
Terms move before headline prices do
When capital tightens, the first thing to change is usually not the headline multiple but the structure behind it. More of the consideration is deferred, earn-outs get longer and harder to hit, seller notes appear, and escrow periods extend.
This matters because a headline price is not proceeds. Two offers at the same multiple can differ substantially in what reaches the seller and when. Read any quoted market multiple with that in mind, including the ones on this site.
Compare offers on cash at completion and the realistic probability of the contingent element, not on the multiple in the headline.
Reading this without over-reading it
These are directional mechanisms, not predictions. Nobody reliably times the sale of a private business to the top of a cycle, and the attempt usually costs more than the swing it was trying to capture. A business held two extra years for market reasons still has to keep performing for those two years.
The factors within your control move the number further than the cycle does: revenue quality, customer concentration, margin, and whether the business operates without you. Those are also the factors that survive a change in conditions.
Where our figures come from
Industry ranges on this site are reconciled internal estimates carrying a sample size and an as-of date; the transaction archive records deals that were publicly reported. The methodology states the limits of each. FairlyValued.com is a research property of FIH.com, advisers on mergers and acquisitions to technology companies.