What Is A Terminal Multiple?
Terminal Multiple is a term used in a DCF analysis and valuation and refers to the final multiple projected for a period and is used to predict Terminal Value. The most commonly used one is EV / EBITDA.
For example, if a company is projected to have an EBITDA of $75mm in 5 years time and the EV / EBITDA multiple being used is 8.0x, the estimated Terminal Value will be 75 x 8 = $600mm. In this situation the terminal multiple is written as 8.0x EV / EBITDA.
Using terminal multiples is one of 2 ways of conducting a DCF analysis, with the other one being the Gordon Growth method (aka Terminal Growth).
Related Terms
