Multiples Valuation: Company Value via Market Multiples

The multiples method (Multiplikatorverfahren) determines the value of a company by multiplying a key figure by a multiplier (multiple). It derives value from the prices of comparable companies, not from a forecast of the company's own cash flows. That is why it is the common instrument for quickly establishing a first range in the M&A market.

How the most common transaction multiple is built and where it misleads is set out in EV/EBITDA.

A multiple does not replace a valuation. It is the starting point for a business valuation comparing multiples, capitalised earnings value and DCF – and for the question which of these figures holds in a sale.

How do you calculate company value with the multiples method?

You multiply an adjusted earnings figure – usually EBITDA – by a factor from comparable transactions and deduct net debt; the result is a range for the equity value, not a price.

The process in five steps:

1. Choose the reference figure: EBITDA, EBIT or revenue, depending on the business model.
2. Adjust the reference figure: normalise one-off effects, owner's salary and private expenses.
3. Form a comparison group: industry, size, region, growth, margin.
4. Apply a range: lower and upper limit of the multiple, not the mean alone.
5. From enterprise value to equity value: deduct net debt.

How much company size alone shifts the factor is shown by a market observation published quarterly for the German-speaking region:

Industry (EBITDA multiple)	Micro-cap (< EUR 5 million revenue)	Small-cap (EUR 5–50 million revenue)	Mid-cap (> EUR 50 million revenue)
Mechanical and plant engineering	3.5–4.5x	4.6–6.0x	5.6–7.1x
IT services & system integrators	5.7–6.8x	6.8–8.5x	8.1–10.5x
Transport, logistics & freight forwarding	3.7–5.2x	4.5–5.6x	5.6–7.0x

Source: DUB KMU Multiples, as of Q2/2026 – aggregated assessments from more than 25 M&A advisors and financial institutions in the German-speaking region, retrieved on 24.09.2026. This is a market observation, not a valuation statement for an individual company.

The table shows above all one thing: within the same industry the upper limit of the smallest size class lies below the lower limit of the largest. Those who transfer a mid-cap figure from the press to a business with EUR 4 million of revenue are calculating themselves rich.

Where multiples come from

A multiple is not an arbitrary figure. It is derived from the market, in two ways. With transaction multiples one evaluates purchase prices actually paid for comparable companies. With trading multiples one derives the factor from the market capitalisations of listed comparable companies.

Both presuppose a robust comparison group: similar industry, size, region, growth and profitability. Without a clean peer group the result is worthless.

For the Mittelstand there is a third source: expert surveys such as the one cited above. They are quickly available and broken down by size classes, but rest on assessments, not on individually disclosed transactions. For a first orientation they are suitable. As the sole justification of a purchase price they are not.

EBIT, EBITDA and revenue multiple

Which of these reference figures fits your business model depends on capital intensity — in detail see EBIT or EBITDA. Concrete ranges by industry are given under EBITDA multiple by industry. Why a revenue multiple always contains an unspoken margin assumption is explained in Calculating and classifying the revenue multiple.

The reference figure depends on the company:

• EBITDA multiple: most widespread for profitable companies. EBITDA disregards depreciation and financing and makes companies with different capital structures comparable.
• EBIT multiple: takes depreciation into account and is thus more sensitive to capital intensity. More informative than EBITDA for asset-intensive businesses.
• Revenue multiple: for companies without stable profit, for instance in growth phases. It says nothing about profitability and is correspondingly rough.

In practice it is not the accounting but the adjusted EBITDA that is used. One-off, non-operating or owner-related items are normalised, such as an excessive managing director salary or a one-off legal dispute.

How revenue multiples are applied in practice is shown by the example of software and SaaS companies, where recurring revenue determines the valuation logic.

Enterprise value and equity value

A frequent mistake is confusing the two quantities. EBIT and EBITDA multiples lead to the enterprise value (total company value), that is, the value of the operating business independent of financing. What the owner receives on a sale, however, is the equity value.

The bridge is net debt, that is, interest-bearing debt less liquid funds:

Equity value = enterprise value − net debt

The same operating earning power leads, with high debt, to a lower proceeds for the owner. How this quantity is negotiated is shown in the article Net debt.

Worked example: a machine builder with EUR 12 million of revenue

The following figures are a constructed example, not a mandate and not a market statement. They show where the action is in the method.

A family company in special-purpose machinery reports an accounting EBITDA of EUR 1.32 million. The managing shareholder draws a salary of EUR 90,000; an employed management would, in the company's assessment, cost around EUR 180,000. In the previous year a one-off legal dispute caused expense of EUR 180,000. The company property belongs privately to the owner and is used at a rent clearly below market; the difference is EUR 60,000 per year.

Step	Amount
EBITDA per financial statements	EUR 1,320,000
− market-standard managing director salary (difference)	− EUR 90,000
+ one-off legal dispute	+ EUR 180,000
− rent difference to market rent	− EUR 60,000
Adjusted EBITDA	EUR 1,350,000
× multiple small-cap mechanical engineering (DUB Q2/2026)	4.6x to 6.0x
Enterprise value (range)	EUR 6.21 to 8.10 million
− net debt	− EUR 1,800,000
Equity value (range)	EUR 4.41 to 6.30 million

Three observations from this example:

The adjustment works in both directions. The owner's salary that is too low and the favourable rent lower EBITDA, the legal dispute raises it. Those who see only the add-backs calculate with EUR 1.5 million instead of EUR 1.35 million.

The range is wider than any adjustment. Between 4.6x and 6.0x lie EUR 1.89 million. Where the company lands within this span is decided by customer concentration, owner dependence, order backlog and growth – not by the calculation.

Net debt counts in full. Every euro of net debt reduces the proceeds by one euro, independent of the multiple.

One point in the multiple weighs heavily. A factor of 5.0x instead of 6.0x lowers the enterprise value in this example by EUR 1.35 million. That is why the derivation of the multiple is more important than the calculation itself.

What the valuation standards say about the multiples method

In Germany, under the auditors' standard, the multiple is a cross-check, not an independent method. IDW S 1 lists simplified price-finding in the section “indications for plausibility assessments” and, for small and mid-sized companies, in a subsection of its own; capitalised earnings value and DCF remain decisive. The IDW's publications on the new version IDW S 1 i.d.F. 2026 adopted in February 2026 mention no change in this respect.

Austria goes a step further since the new version of the expert opinion KFS/BW 1 (2025). It introduces the market value as a measure of value of its own, and for this measure the multiples method is expressly assigned a higher status than for the objectified company value. The expert opinion is binding for engagements accepted from 30 June 2026; what is decisive is the acceptance of the engagement, not the valuation date (LeitnerLeitner, 17.02.2026).

German tax law also knows the idea. Under § 11 para. 2 BewG, the fair market value of unlisted shares is to be derived primarily from sales between third parties that took place less than a year ago. If there are no such sales, the method is to be applied that an acquirer would use as the basis for setting the purchase price; the net asset value must not be undercut.

Framework	Role of the multiple	Source
IDW S 1 (Germany)	Plausibility assessment, no independent valuation method	IDW S 1 i.d.F. 2008, section 7.5; new version i.d.F. 2026 adopted on 11.02.2026
KFS/BW 1 (2025) (Austria)	weighted higher for the measure of value market value than for the objectified value	KFS/BW 1 (2025), binding for acceptance of engagements from 30.06.2026
§ 11 para. 2 BewG (tax law DE)	permissible if an acquirer would calculate in this way; net asset value as lower limit	Bewertungsgesetz, version retrieved 24.09.2026

A hidden multiple: the simplified capitalised earnings method

The tax office also calculates with a factor. In the simplified capitalised earnings method, the sustainably achievable annual earnings are multiplied by a statutorily fixed capitalisation factor of 13.75 (§ 203 BewG).

The factor looks high because it refers to earnings after a flat-rate tax deduction, not to EBITDA. It is therefore not comparable with a transaction multiple. It serves inheritance and gift tax, not purchase price finding.

Distinction from capitalised earnings value and DCF

Capitalised earnings value and DCF derive value from the forecast future of the specific company. The multiples method derives it from the market for other companies. This makes it quick and close to the market, but less precise in the individual case.

In practice the methods are combined: DCF delivers the fundamental value, multiples deliver the market range and the plausibility check. If the two deviate strongly, that is a signal to review the assumptions. How these methods work together is shown in the article what is my company worth.

Limits of the method

The method is only as good as its comparison group. For small and mid-sized companies, clean peers are often hard to find. Trading multiples come from larger, more liquid companies and can be transferred to a Mittelstand company only with discounts. Multiples also fluctuate with the market cycle. And they always deliver a range, not a point value.

The greatest limit, however, often lies with the seller. According to the DIHK-Report Unternehmensnachfolge 2025, 36 percent of the previous owners advised by the IHKs demand an excessive purchase price. A cleanly derived multiple is the soberest remedy against this gap – provided one chooses the size class in which one's own company actually lies.

Multiple, enterprise value and equity value are given short definitions in the M&A glossary.

What range results for your figures you can check yourself beforehand: estimate the EBITDA range with the company value calculator.

Frequently asked questions

Which multiple should I use, EBIT or EBITDA?

EBITDA is the most common for profitable companies with different capital structures. For asset-intensive businesses the EBIT multiple is more informative, because it includes depreciation. The revenue multiple is only a rough approximation without a link to profitability.

Why are the sale proceeds lower than the enterprise value?

Because the multiple yields the enterprise value, that is, the value of the business before financing. Net debt is deducted from it. The remaining equity value is what flows to the owner.

Where do I get realistic multiples for my industry?

From comparable transactions, listed peers and – for smaller companies – from expert surveys that break down by size class. Publicly available industry tables give an orientation but are rough. The derivation becomes robust only with a cleanly defined comparison group.

Why are the multiples lower for small companies?

Because small companies on average depend more heavily on the owner, on a few customers and on individual employees and find fewer buyers. In the market observation cited, the upper limit of the smallest size class is, in all three industries shown, below the lower limit of the largest.

Is the multiples method more accurate than DCF?

No, it is different. It is close to the market and quick, but less precise in the individual case, because it draws on other companies. DCF is more fundamental but depends heavily on the forecast assumptions. In practice the two complement each other.

Does a court or the tax office recognise a multiple?

In Germany it serves, under IDW S 1, for plausibility checking; for tax purposes § 11 para. 2 BewG permits methods that an acquirer would use for setting the purchase price. In Austria KFS/BW 1 (2025) weights the multiple higher for the measure of value market value. Which method holds in the individual case is clarified by auditors or tax advisors.

Can I value my company myself using a multiple?

For a first order of magnitude yes. For a robust valuation no: adjusting EBITDA, choosing the peer group and deriving the suitable multiple require experience and influence the result considerably.

An older method that is still relevant for tax purposes is the Stuttgart method — for a market-based purchase price indication, however, it is no longer suitable.