Manufacturing Firms
Manufacturing Firms
Lower Mid Market (Sales less than $5M)
* 3 to 4 times SDCF
* 4 to 5 times EBIT
Upper Mid Market (Sales $5M to $50M)
* 4 to 5 times SDCF
* 4.5 to 5.5 times EBITDA
Key Drivers
* Larger firms demand larger multiples, economies of scale
* Condition of capital assets, new assets higher end of range
* Years in operation, known in the industry
* If proprietary product, higher end of range
* Reliance on key customers will result in lower end of range unless long term agreements in place
* Supplier agreements, are prices subject to agreements or risk of price fluctuation
* Location of supply, exchange rate risk if U.S. dollar
* Degree of competent management and experience of employees
* Management information and inventory costing systems
* Variance analysis of unabsorbed overhead, other cost variances from standards (indicates ability to budget and set standards for product cost)
Structuring the deal
* Mostly cash deal with portion (20% or less vendor financed for large deals more for small deals)
* Banks finance assets at 60% of market value, Receivables & Inventory at 75%,
* Corporate purchasers often structure as share purchase