In Mergers and Acquisitions, Multiples are Way, Way, Way Overrated

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In M&A, everyone wants to know “the multiple” – the number you can apply to a company’s earnings to instantaneously conjure its value.

Even when we know it is often just a quick and dirty “rule of thumb” that merely gets you in the right ballpark, it often becomes the benchmark against which buyers and sellers determine if they got a good deal.

Which would be just peachy if the multiples that get tossed around like so much confetti on New Year’s Eve were derived from even a modicum of financial rigor. 

Because, well, they’re not.

You see, multiples are way overrated – almost always misinterpreted and misused.  Worse yet, in the hands of a shrewd buyer, they can be weaponized.

We delve into this most crucial determinant of value and reveal why the Holy Grail of M&A is all too often a wholly fail – and what you can do to make sure you’re on the right side of this calculation.