Industry-specific multiples
This freely accessible sample from the KPMG Multiples database offers a comprehensive collection of market multiples, specifically for your industry. The data extract provides you with freely accessible and user-friendly access to current and reliable market multiples and benchmarks, which are updated on a quarterly basis.
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Information on multiples
What are multiples?
The basic idea of the multiples method is to determine the value of a company by applying suitable multiples to an (earnings) figure (sales, EBITDA, EBIT, net income, etc.) of the company being valued.
Trading vs. transaction multiples
There are two types of multiples, which are derived based on different principles: Transaction multiples are derived on the basis of comparable transactions (size, sector or timing of the transaction). Consequently, these are historical and are only available after (comparable) company transactions have taken place. Trading multiples are derived on the basis of past and future figures of comparable listed companies (known as the peer group). To determine the trading multiples, the entity value or equity value of comparable companies is set in relation to the selected (earnings) figure.
Entity and equity multiples
A further distinction between the multiples is made on the basis of whether the comparative figure relates to the enterprise value (entity multiples) or the equity value (equity multiples). Entity multiples such as the EBIT multiple or the EBITDA multiple refer to the total company value (enterprise value). Valuations based on equity multiples only refer to the equity value. The net debt, consisting of interest-bearing non-current and current liabilities and cash and cash equivalents, is initially ignored. An example of an equity multiple is the price/earnings ratio (P/E ratio). The applied multiples often also depend on the business model or sector of the company being valued.
What the data extract provides
The multiples provided in this data extract are trading multiples derived from listed companies. Sector-specific EBIT and EBITDA multiples are shown. Both are entity multiples and therefore relate to the enterprise value.
Frequently asked questions
Why are EBITDA and EBIT multiples often used?
These multiples consider the results for all investors (i.e. equity and debt holders), as they are "earnings-before" figures and the relevant earnings figure is not influenced by the results for the debt investors (interest income and expenses). EBITDA and EBIT are also pre-tax earnings figures and are therefore not affected by differences in taxation in international comparisons. Moreover, they are easy to understand and very similar to a cash flow figure.
When is it useful to apply a valuation using multiples?
The valuation with multiples often serves as an additional value and price benchmark to check the plausibility of the fundamental company value derived using the DCF method. Furthermore, multiples show ranges of possible transaction prices and can be used if detailed planning calculations for the application of a DCF method are not available.
What are the challenges of a valuation using multiples?
Despite their usefulness due to their simple application, multiples have some limitations that need to be considered when applying them. Identifying suitable peer group companies can be challenging as no company is exactly comparable to another. In addition, the determined multiples can be influenced by fluctuations in prices on the capital markets.
