• Sharebar

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)?

The WSO Advantage - Investment Banking

Financial Modeling Training

IB Templates, M&A, LBO, Valuation + Learn More.

IB Interview Prep Pack

30,000+ sold & REAL questions Learn More.

Resume Help from Actual IB Pros

Land More IB Interviews. Learn More.

Find Your Perfect IB Mentor

Realistic IB Mock Interviews. Learn More.

Comments (7)

  • JeffSkilling's picture

    Which ever makes the deal look best.

  • Bernankey's picture

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

  • Stringer Bell's picture

    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.

  • CNB90's picture

    To unlock this content for free, please login / register below.

    Connecting helps us build a vibrant community. We'll never share your info without your permission. Sign up with email or if you are already a member, login here Bonus: Also get 6 free financial modeling lessons for free ($200+ value) when you register!