EBITDA multiples reflect growth expectations, recurring revenue quality, and market risk appetite. Higher growth and more predictable cash flows command higher multiples.
EV/EBITDA Multiples by Sector (2024)
| Sector | Lower Quartile | Median | Upper Quartile |
|---|---|---|---|
| SaaS (ARR >$10M, 30%+ growth) | 15× | 22× | 30×+ |
| B2B Software (mature) | 8× | 12× | 18× |
| Healthcare tech | 10× | 15× | 22× |
| Manufacturing | 4× | 6× | 9× |
| Distribution / logistics | 5× | 7× | 10× |
| Business services | 5× | 8× | 12× |
| Retail | 4× | 6× | 8× |
| Construction | 3× | 5× | 7× |
Factors That Expand Multiples
- Revenue growth: Every 10% improvement in YoY growth typically adds 1–2 turns of multiple
- Recurring revenue: Subscription or contract revenue trades at a premium to transactional
- Gross margin: Higher margins = higher multiples (SaaS 70%+ margin drives premium)
- Customer concentration: Low concentration (no single customer >10%) expands multiples
- Retention: NRR >110% can add 3–5× to a SaaS EBITDA multiple
Deal Size Premium
Larger transactions attract a premium. Sub-$5M EBITDA businesses sell at 3–5× discount to large-cap comparables because of limited buyer pool, key-man risk, and lower operating leverage.