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Selling your company or getting investors – Is your company worth what you think its worth or what someone will pay for it?

February 17, 2009

Had a very pleasant conversation today with a senior Investment Banker from Jeffries and Co. who told me today’s multiples for selling a company. To put it politely, they’re startling.

In sum, in the very best case of same revenues as last year (or even a slight increase), and same profitability, the current SMB multiple is around 3-4X EBITDA. If this year’s revenues are running less than equal to last year’s, you’re seen as damaged and virtually unsaleable except at ridiculously low prices, or not at all. Both of us have seen recent instances where potential purchasers walked away in the belief that an already damaged company will only get worse – and cheaper.

If you’re unprofitable, don’t even think of selling as a company, think of your company as a selection of fungible assets. When I asked him today’s multiple on the Top Line (usually it’s been in the range of 7-12 times for the past few years, depending on industry), he mentioned that in today’s market, Top Line without profitability isn’t even thought of.

The lesson is clear – what your company is worth (even if you’re not selling it’s good to have an objective figure as a measure of how you’re doing) is what someone will pay for it and if there’s any issues affecting the Financials, all bets are off. Uncover hidden issues, fix those plus the one’s you already know of NOW.


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