When you're doing a DCF, a common way to project into the future is to use a terminal. One is the EBITDA multiple. Which can be something like 7x, 8x, 9x, etc.

How do bankers decide what the multiple should be (ie 7,8,9, or whatever)?

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Which ever makes the deal look best.

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Whats your question? The terminal value should just the perpetuity of cash flows in the stable growth period.


Ideally, you'd be looking at how market is valuing comparable companies and/or any precedent transactions in the space

In actuality, as an analyst you'll stick in a number your VP or MD gives you


Everything above is correct. Typically we'll put together comps (prev. trans and market) for the targets peer group, calc the mean, median, max and min to arrive a multiples (usually just use the mean, but always defer to what your senior guys want to use or just use your brain / common sense in a pinch). Usually whatever multiple you take away from that could be you're base multiple for your sensitivities.


The multiples are for the 5th or in some cases the 10th year, so do we take the median EV/EBITDA multiple of comparables as calculated from today figures? Or some expected multiple in 5 years?

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