Is the Multiple Different Today Than It Was Last Year?

The word on the street is that multiples have changed.

Multiples have not changed!

So what has changed? Now, buyers are using pre-Covid profits to estimate future profits.

The multiple isn’t changing, but expected future profits have changed. When buyers use lower pre-Covid profits to calculate a selling price, the result is a lower selling price.

So how low will selling prices go? Some say all the way back to pre-Covid levels; some say only part of the way back. What I see is that though demand is slowing, it is not completely reverting to pre-Covid levels.

M&A markets in general are slower as many buyers are sitting on the sidelines waiting to see “what’s going to happen.” What’s going to happen with interest rates? What’s going to happen with the November election? What’s going to happen with a recession? Of course, there is also still a Covid hangover – What’s going to happen with Covid and the supply chain problems it brought?

The most important thing you can do to realize the highest selling price is keep your normalized profit at or above industry benchmark.

Including real estate in your sale ALWAYS makes it easier to sell, which means a better deal for both seller and buyer. But, commercial real estate is in a coma right now, so expectations may have to be adjusted for real estate selling prices as well. The size of adjustment needed for real estate value is driven by location but the need for an adjustment is national – climbing interest rates mean the same cash flow pays for less debt, so prices have to fall.

The upside of selling now is that capital gains tax rates are still low!

My hope is that you’ve profited considerably over the last few years. Now, it’s time to enjoy the spoils and leave the unknown future to a successor.

If you are considering selling, there is no better time. Contact Stacey International LLC. Our credentialed, experienced senior executives are ready to help.