Valuation Using Market Multiples

Macro Consulting Reading: For CEOs, CFOs, COOs, and SME directors in Portugal, this topic should be assessed as a management decision: strategic priority, operational impact, execution risk, and internal capability.

On a Monday in November 2023, the CEO of a Portuguese SME in automotive components received a call from a private equity fund interested in acquiring the company. The question was direct: "What is your business worth?" The CEO, unprepared, asked for three weeks to present a proposal. He hired a consultancy that delivered a detailed discounted cash flow (DCF) valuation—247 pages, 18 scenarios, macroeconomic sensitivities, 10-year projections. The fund replied within 48 hours with an offer significantly below the calculated value, based on a simple multiple: 6.2× EBITDA, the sector average in Central Europe. The deal closed three months later at the multiple value, not the DCF. This scene repeats weekly in meeting rooms from Porto to Faro. Valuing companies by market multiples is not the most academically sophisticated methodology—but it is the one that closes most M&A deals in Portugal, according to CMVM and TTR data for 2022-2023. Why? Because it is fast, comparable, negotiable, and anchored in real transactions. This article is the definitive manual for CEOs, CFOs, and managers who need to master the method the market actually uses when money changes hands.

What is company valuation by multiples—and why it dominates executive decisions

Valuation by market multiples is a comparative method that determines a company’s value by applying ratios observed in transactions or stock prices of similar companies. Instead of projecting future cash flows and discounting them at a risk-adjusted rate (DCF), the multiples method asks: "For how much did similar companies sell?" and applies that ratio—price/EBITDA, price/revenue, EV/sales—to the target company.

This article targets three executive profiles: sellers preparing a company for sale and needing to argue value with market data; strategic buyers assessing acquisition targets under time and budget pressure; and CFOs reporting to boards or private equity boards and needing to justify investment decisions with external benchmarks. What you will learn: the six multiples that dominate M&A in Portugal, how to build a defensible peer group, when to adjust multiples for control premiums or liquidity discounts, and how to integrate this methodology into corporate finance processes that withstand due diligence.

The multiples method does not replace DCF—it complements it. In a well-structured M&A process, DCF sets the floor (minimum value based on cash generation capacity), while multiples set the ceiling (maximum value the market paid for comparable assets). The negotiation zone lies between these two limits. Ignoring multiples is entering a negotiation without knowing what the market is paying; ignoring DCF is selling value creation capacity without economic foundation. Excellence lies in triangulation: DCF for intrinsic value, multiples for relative value, and precedent transaction analysis for market value.

Why multiples-based valuation dominates M&A in Portugal—context and market data

According to Transactional Track Record (TTR), the Portuguese M&A market recorded 412 transactions in 2023, with an aggregate value of €8.7 billion. Most involved unlisted companies, where public information is scarce and decision timelines are short. In a Deloitte survey of 127 Portuguese CFOs (2023), most stated they use multiples as a primary or secondary valuation methodology, compared to those using DCF and only a minority applying real options models.

The reason is pragmatic: speed and comparability. In a competitive sale process (auction), buyers have 2-3 weeks between receiving the information memorandum and submitting indicative offers. Building a robust DCF requires detailed financial projections, validation of operational assumptions, working capital modeling, and discount rate definition—work that can take 4-6 weeks. Multiples allow for a first estimate in 48-72 hours: identify 5-8 comparable companies, extract multiples from databases like Capital IQ or Orbis, apply to the target, adjust for premiums/discounts. This speed does not compromise rigor—as long as the peer group is well constructed.

The Portuguese context adds specificities. First, sector concentration: according to INE, most Portuguese SMEs are concentrated in five sectors (trade, construction, accommodation/food, manufacturing, consulting). This concentration facilitates identifying comparables within national borders. Second, internationalization of the buy-side: CMVM data shows that most M&A deal value in Portugal in 2022-2023 originated from foreign funds or corporations (Spain, France, USA, UK). These buyers bring standardized valuation playbooks, almost always based on global sector multiples adjusted for country risk. Third, scarcity of public information: Portugal has only 44 listed companies on Euronext Lisbon (as of December 2023), limiting the pool of listed comparables. The solution is to use transaction multiples instead of trading multiples, relying on sources like Mergermarket, Zephyr, or sector reports from AICEP.

Recent trends show three patterns. First: rising multiples in technology and software sectors. Portuguese SaaS companies that traded at 3-4× annual recurring revenue (ARR) in 2019 reached 6-8× ARR in 2021-2022, converging with European standards. Second: compression of multiples in traditional sectors. Food retail companies that traded at 8-9× EBITDA in 2018 dropped to 5-6× in 2023, reflecting margin pressure and digital disruption threats. Third: the emergence of hybrid multiples in energy transition sectors, where traditional metrics (EBITDA, profit) coexist with operational metrics (MW installed, PPA contracts, project pipeline). Understanding these dynamics is essential to apply multiples with discernment, not as mechanical formulas.

The six multiples that dominate transactions—technical framework and application

EV/EBITDA—the universal multiple for operational profitability

The Enterprise Value/EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiple is the most used in global and Portuguese M&A. It relates the total value of the company—market capitalization plus net debt—to its ability to generate operational cash before interest, taxes, and depreciation. Formula: EV/EBITDA = (Market Cap + Net Debt) / EBITDA.

Advantages: neutralizes differences in capital structure (leveraged vs unleveraged companies), ignores accounting policies for depreciation and amortization, and focuses on operational cash generation. It is comparable across tax jurisdictions and sectors. According to PwC, most private equity transactions in Europe use EV/EBITDA as the primary multiple.

Limitations: EBITDA is not free cash flow. It ignores capex needs (investment in fixed assets) and changes in working capital. A company with €5M EBITDA but €4M annual capex generates much less available cash than the multiple suggests. Capital-intensive sectors (heavy industry, utilities, telecoms) require adjustments. The solution: use normalized EBITDA, excluding one-offs (asset sales, restructurings, non-recurring costs) and adjusting for maintenance capex.

Practical application: in a transaction involving a Portuguese industrial company with €3.2M EBITDA, €1.8M net debt, and a sector multiple of 6.5×, the Enterprise Value would be €3.2M × 6.5 = €20.8M. The equity value (value to shareholders) would be €20.8M − €1.8M = €19M. If the company has excess cash (€500k not needed for operations), add it to the equity value: €19M + €500k = €19.5M.

EV/Revenue—the scale multiple for growth companies

The EV/Revenue (or EV/Sales) multiple relates the company’s value to its turnover. Formula: EV/Revenue = (Market Cap + Net Debt) / Annual Revenue. It is prevalent in three contexts: high-growth, unprofitable companies (tech startups, SaaS, biotech); sectors with compressed margins and volatile EBITDA (retail, distribution); and turnaround situations where current EBITDA does not reflect future potential.

Advantages: simplicity and data availability (revenue is less manipulable than profit), applicable to unprofitable companies, and focus on market scale. According to CB Insights, most Series B tech valuations in Europe use revenue multiples.

Limitations: completely ignores profitability. Two companies with €10M revenue can have EBITDA margins of 2% and 20%—the revenue multiple treats them equally. It does not capture operational efficiency, pricing power, or cost structure. Inappropriate use in mature, low-growth sectors leads to dangerous overvaluations.

Sector application: in Portuguese SaaS, multiples of 4-7× ARR (Annual Recurring Revenue, a revenue variant) are common for companies with >30% annual growth and <10% churn. In traditional retail, multiples of 0.3-0.6× revenue reflect tight margins. The key is to segment by growth and recurrence profile: recurring revenue (subscriptions, multi-year contracts) commands multiples 2-3× higher than transactional revenue.

P/E—Price/Earnings for listed companies and public comparisons

The Price/Earnings multiple (P/E or PER) relates market capitalization to net profit. Formula: P/E = Market Cap / Net Profit. It is the dominant multiple in listed markets, reported daily in Bloomberg, Reuters, and financial newspapers.

Advantages: reflects the final metric—profit available to shareholders after all deductions (interest, taxes, depreciation). Allows direct comparison between listed companies in the same sector. Data is widely available and updated in real time.

Limitations: extremely sensitive to accounting policies (depreciation, amortization, provisions), tax structure, and financial leverage. A company with an effective corporate tax rate of 10% (via tax benefits) will have an artificially low P/E versus a competitor at 25%. Not applicable to loss-making companies. In unlisted M&A, P/E is less used because: (1) there is no continuous market price; (2) SME accounting profit is often "managed" to minimize tax; (3) capital structure is arbitrary (owners set dividends vs retention).

Application in the Portuguese context: useful when comparing an unlisted target with listed peers. Example: valuing a Portuguese pharmacy chain using the average P/E of 12-14× from listed European peers (Galenica, Phoenix, Alliance Boots), adjusting for a 20-30% liquidity discount (unlisted companies are less liquid). P/E also serves as a sanity check: if EV/EBITDA implies a P/E of 25× in a mature sector where listed peers trade at 10-12×, there is a misalignment to investigate.

EV/EBIT—the multiple isolating pure operational performance

The EV/EBIT (Earnings Before Interest and Taxes) multiple relates Enterprise Value to operating profit before interest and taxes. Formula: EV/EBIT = (Market Cap + Net Debt) / EBIT. It sits between EV/EBITDA (which ignores depreciation) and P/E (which includes interest and taxes).

Advantages: captures the impact of depreciation and amortization, relevant in capital-intensive sectors (industry, logistics, utilities) where capex is structural. Neutralizes tax differences between jurisdictions, facilitating international comparisons. More conservative than EV/EBITDA—penalizes companies with heavy depreciable assets.

Limitations: still ignores capital structure (interest) and tax (corporate tax). Sensitive to depreciation policies (straight-line vs accelerated, asset useful life). Less used in private equity because funds prefer EBITDA (which maximizes apparent value by ignoring non-cash depreciation).

Practical application: in a transport company with €8M EBITDA, €2.5M depreciation (EBIT = €5.5M), and a sector EV/EBITDA multiple of 7×, EV would be €56M. But using EV/EBIT of 10× (typical for the sector), EV would be €55M—convergence that validates the valuation. Significant discrepancies signal that the target’s depreciation is misaligned with the sector (older assets, aggressive accounting, need for extraordinary capex).

P/BV—Price-to-Book for asset-intensive sectors

The Price/Book Value multiple (P/BV or P/B) relates market capitalization to book equity (assets minus liabilities). Formula: P/BV = Market Cap / Equity. Prevalent in banks, insurers, real estate, and industries where tangible assets dominate the balance sheet.

Advantages: anchored in audited asset values, less volatile than earnings multiples, relevant when assets have liquid markets (real estate, equipment). A P/BV of 1× means the company trades at book value—useful as a floor in liquidations or restructurings.

Limitations: ignores profit generation capacity (a company with ROE of 20% vs 5% will have very different P/BV, but the multiple does not capture this directly). Book values may be outdated (properties acquired 20 years ago at historical cost). Irrelevant for service or technology companies where intangible assets (brand, software, know-how) dominate but do not appear on the balance sheet.

Application in Portugal: common in valuations of family businesses with significant real estate assets (hotels, logistics warehouses, industrial buildings). Example: a logistics company with €15M equity (including €12M in real estate) and an implied market cap of €22M would have a P/BV of 1.47×. If the real estate is undervalued (booked at 2005 cost, but current market value is €18M), adjusted equity would be €21M, and P/BV would fall to 1.05×—a more defensible multiple.

Sector operational multiples—specific metrics the market values

Beyond universal financial multiples, each sector develops operational metrics that capture specific value drivers. These operational multiples complement financial ones and, in some cases, dominate negotiations.

Sector examples:

• Technology/SaaS: EV/ARR (Annual Recurring Revenue), CAC Payback (months to recover customer acquisition cost), LTV/CAC (lifetime value to acquisition cost ratio). SaaS companies with LTV/CAC >3× and CAC Payback <12 months command multiples of 8-12× ARR.
• Retail: EV/m² of sales area, sales/m², EBITDA/store. A supermarket chain may trade at €3,500/m², reflecting productivity and location.
• Hospitality: EV/room, RevPAR (Revenue Per Available Room), EV/EBITDAR (EBITDA before rent, relevant in sale-and-leaseback). Four-star urban hotels in Lisbon trade at €150k-€250k/room (2022-2023 data).
• Telecommunications: EV/subscriber, ARPU (Average Revenue Per User), churn rate. Mobile operators are valued at €800-€1,200/active subscriber.
• Renewable energy: €/MW installed, EV/MWh produced, P/PPA (Power Purchase Agreement). Solar parks with 15-year PPA trade at 8-10× EBITDA vs 5-6× without PPA.
• Healthcare/Clinics: EV/doctor, EV/consultation, EBITDA/bed (hospitals). Dental clinics trade at €80k-€150k/operational chair.

Application requires normalization. A hotel with 80 rooms and €1.2M EBITDA (€15k/room) vs another with 120 rooms and €1.5M EBITDA (€12.5k/room)—the first is more efficient and deserves a higher multiple. Operational multiples reveal efficiency that financial multiples may mask.

Building the peer group—the art of selecting defensible comparables

Selection criteria: sector, size, geography, business model

The validity of company valuation by multiples critically depends on the quality of the peer group (set of comparable companies). A poorly constructed peer group produces meaningless multiples. The four essential criteria:

Sector and activity: comparables should operate in the same sector or segment. "Manufacturing" is too broad—automotive components, technical textiles, and plastic packaging have radically different margin, cyclicality, and capital intensity profiles. Drill down to NACE code at 4 digits or, better, define by product/service. A software company for SME management is not comparable to a video game developer, even if both are "technology".

Size and scale: companies of different scales have different multiples. An SME with €5M revenue faces customer concentration risks, key person dependency, and limited capital access that a €50M company has overcome. Rule of thumb: comparables should be within 0.5-2× the size of the target (if the target has €10M revenue, peers between €5M-€20M). Exception: use large listed companies as anchors, applying a 20-30% size discount.

Geography and market: companies exposed to different markets have different risk profiles. A Portuguese company exporting 80% to Germany/France is more comparable to European peers than to domestic companies. Consider: currency exposure (USD vs EUR revenue), country risk (Portugal vs Poland vs Spain), market maturity (growth of 20% y/y vs 5% y/y).

Business model and financial profile: B2B vs B2C, subscription vs transactional, asset-light vs capital-intensive, integrated vs outsourced. Two examples: (1) a software company selling perpetual licenses vs a SaaS— the latter has recurring revenue, predictability, and deserves a 2-3× higher multiple; (2) a retailer with own stores vs one with franchising—completely different cost structures, capex, and margins.

Data sources: where to find reliable multiples in Portugal

The scarcity of Portuguese listed companies requires creativity in data collection. Five practical sources:

Transaction databases: Mergermarket, Zephyr (Bureau van Dijk), Capital IQ (S&P), Refinitiv. Allow filtering transactions by sector, geography, size, and extracting paid multiples. Limitation: many transactions do not disclose value (especially in Portugal, where only a minority report deal value). Solution: use median multiples from similar European transactions, adjusting for country risk.

Sector reports: PwC, Deloitte, KPMG, EY publish annual M&A sector reports (TMT, industrial, consumer, healthcare) with median and quartile multiples. AICEP publishes sector studies with internationalization data. Advantage: multiples already segmented by sub-sector and geography.

Comparable listed companies: Euronext Lisbon (Portugal), BME (Spain), Borsa Italiana, Euronext Paris. Extract trading multiples (P/E, EV/EBITDA) from listed companies and apply a 20-30% discount for lack of liquidity. Tools: Bloomberg Terminal, FactSet, or free via Yahoo Finance, Investing.com (less granular data).

Sector associations and market studies: APICCAPS (footwear), CITEVE (textiles), AIMMAP (moulds), APLOG (logistics), AHRESP (hospitality) publish studies with sector indicators. While they rarely include explicit multiples, they provide operational benchmarks (median EBITDA margin, ROA, asset turnover) that allow inferring reasonable multiples.

Advisors and internal deal flow: Corporate finance consultancies, investment banks, and private equity funds accumulate proprietary transaction data. If preparing a sale, an experienced advisor brings comps from recent non-public deals. This information is valuable—justifying success fees of 1-2% in M&A.

Adjustments and normalizations: from raw to applicable multiples

Observed multiples are rarely applied directly. They require adjustments for structural differences between the target and comparables. Six critical adjustments:

Control premium vs minority discount: control transactions (>50% of capital) pay premiums of 20-30% vs market prices (which reflect minority stakes). If using listed multiples to value a control acquisition, add 20-30%. Conversely, if selling a minority stake, apply a 20-30% discount.

Liquidity discount: unlisted companies are illiquid—there is no secondary market for quick sales. Typical discount: 20-30% vs listed peers. The smaller the company and the less structured the sector, the higher the discount. Exception: competitive auctions with 5+ bidders reduce the discount to 10-15%.

EBITDA normalization: adjust for non-recurring costs (restructurings, litigation, one-off consulting), excessive partner-manager salaries (family SMEs often pay above-market salaries to extract profit without tax), rents paid to shareholder-owned properties (if the company pays €200k/year rent to a shareholder property worth €120k at market, add €80k to normalized EBITDA).

Synergy adjustment: strategic buyers pay more than financial buyers because they capture synergies (cost reduction, cross-selling, economies of scale). Strategic transaction multiples are 10-20% higher than financial transactions. If your comps are mostly private equity buyouts and you are selling to a strategic, argue for a higher multiple.

Time adjustment: multiples vary with economic and market cycles. 2021 multiples (liquidity peak, zero rates) are 20-30% higher than 2023 (rates at 4-5%, recession). Use multiples from the last 12-18 months, not 5-year averages. If the market is down, consider closed transaction multiples (reflecting reality) vs listed multiples (which fluctuate daily).

Growth and risk profile adjustment: a company with 15% annual growth deserves a 1.3-1.5× higher multiple than one with 5% growth, even in the same sector. Risk also matters: customer concentration (if top 3 clients = 60% of revenue, discount 10-15%), key person dependency (founder holds critical relationships, discount 10-20%), regulatory exposure (sectors under scrutiny—gambling, tobacco—suffer 20-30% discounts).

Step-by-step application methodology—from screening to final offer

Phase 1: Defining the universe and initial screening (Week 1)

Objective: identify 15-25 potentially comparable companies. Process:

Step 1.1: Define screening criteria. Sector (NACE 4-6 digits), geography (Portugal, Iberia, Southern Europe), size (revenue €X-€Y, EBITDA €A-€B), business model (B2B/B2C, products/services). Example: target is a plastic automotive component manufacturer, €12M revenue, €2.1M EBITDA, 80% exports. Criteria: NACE 2229 (plastic packaging manufacturing) + 2932 (automotive components), revenue €5M-€30M, Europe.

Step 1.2: Run screening in databases (Orbis, Capital IQ) or manually via sector associations. Identify 20-30 companies. Validate availability of financial data (last 3 years’ accounts, capital structure).

Step 1.3: Apply qualitative filters. Exclude companies in restructuring, with recent control changes, or divergent business models (e.g., integrated manufacturer vs pure assembler). Reduce to 10-15 solid peers.

Deliverable: list of 10-15 comparables with summary profiles (activity, size, geography, ownership).

Phase 2: Data collection and multiple calculation (Week 2)

Step 2.1: Extract financial data from comparables. Revenue, EBITDA, EBIT, net profit, net debt, equity for the last 2-3 years. Source: filed annual accounts (Portugal: Informação Empresarial Simplificada), databases, public reports.

Step 2.2: Calculate Enterprise Value for comparables. If listed: market cap + net debt. If transactions: reported deal value (already EV). If unlisted without recent transaction: infer EV by applying sector multiple to EBITDA (bootstrap—use multiple to calculate EV, which then generates multiple; requires iteration).

Step 2.3: Calculate multiples. For each comparable: EV/EBITDA, EV/Revenue, EV/EBIT, P/E (if applicable). Use LTM (Last Twelve Months) metrics for consistency. Organize in a table: Company | Revenue | EBITDA | EV | EV/EBITDA | EV/Revenue.

Step 2.4: Statistical analysis. Calculate median, mean, quartiles (Q1, Q3), standard deviation. The median is more robust than the mean (less sensitive to outliers). Identify and exclude outliers (multiples >2× standard deviation from the mean) if justified (special situations, erroneous data).

Deliverable: multiples table with descriptive statistics. Example: median EV/EBITDA = 6.2×, mean = 6.5×, Q1 = 5.1×, Q3 = 7.8×.

Phase 3: Multiple selection and adjustment (Week 3)

Step 3.1: Select reference multiple. Use the median as a baseline. If the target has superior characteristics (faster growth, higher margins, lower risk), position at Q3. If inferior, at Q1. Justify with data: "The target has an EBITDA margin of 18% vs sector median of 14%, growth of 12% vs 6%, and client concentration of 20% vs 35%—justifies a multiple at the 70th percentile, i.e., 7.2× EBITDA."

Step 3.2: Apply adjustments. Control premium (+20-30% if control transaction and comps are listed), liquidity discount (−20-30% if target is unlisted and comps are listed), synergy adjustment (+10-20% if strategic buyer with documented synergies). Document each adjustment with rationale.

Step 3.3: Normalize target EBITDA. Adjust for: excessive partner salaries (+€150k), above-market rents (+€80k), non-recurring restructuring costs (+€200k), one-off asset sale gains (−€300k). Reported EBITDA: €2.1M. Normalized EBITDA: €2.1M + €150k + €80k + €200k − €300k = €2.23M.

Step 3.4: Calculate valuation range. Apply adjusted multiple to normalized EBITDA. Example: multiple of 7.2× (70th percentile adjusted) × normalized EBITDA of €2.23M = EV of €16.06M. Also calculate conservative scenario (Q1, 5.1×) = €11.37M and optimistic (Q3, 7.8×) = €17.39M. Present range: €11.4M - €17.4M, with central value of €16.1M.

Deliverable: justified valuation range, with adjustment bridge (table showing base multiple → adjustments → final multiple).

Phase 4: Triangulation and validation (Week 4)

Step 4.1: Compare with DCF. If available, calculate discounted cash flow valuation. The DCF should be within or near the multiples range. If DCF = €13M and multiples = €16M, investigate: conservative DCF growth assumptions? Multiples inflated by strategic transactions? Converge to a value supported by both methodologies.

Step 4.2: Sanity checks. Calculate implied cross-multiples. If EV/EBITDA = 7.2× implies EV of €16M, what is the implied EV/Revenue? €16M / €12M revenue = 1.33×. Is it aligned with comps (median EV/Revenue of 1.1-1.4×)? If yes, validation. If not, review.

Step 4.3: Sensitivity analysis. Test impact of variations: what if EBITDA drops 10% (recession)? What if sector multiple compresses 15% (credit tightening)? Present scenarios: base (€16.1M), downside (€12.8M), upside (€18.5M).

Step 4.4: Prepare valuation memo. 8-12 page document: (1) executive summary with value range, (2) target company description, (3) methodology and peer group, (4) multiples table, (5) adjustments and normalizations, (6) triangulation with DCF, (7) sensitivities, (8) appendices (accounts, detailed comps). This document supports board decision, counterparty negotiation, or fairness opinion.

Deliverable: executive valuation memo ready for board or investor presentation.

Implementation in M&A context—from teaser to closing

Use of multiples in sell-side processes (company sale)

When representing sellers, valuation by multiples serves three functions: initial pricing (setting value expectations), negotiation (arguing value with market data), and validation (confirming that received offers are in line with the market).

Weeks 0-2 (Preparation): Build peer group, calculate multiples, define value range. Prepare teaser (2-page anonymous document) and information memorandum (IM, 40-60 page document with operational and financial detail). The IM includes a valuation section with reference multiples—does not propose a price, but anchors expectations. Example: "Comparable companies trade at 6-8× EBITDA; the Target, with superior margin and robust growth, is positioned at the top of this range."

Weeks 3-5 (Marketing and indicative offers): Distribute IM to 8-15 potential buyers (long list). Receive non-binding indicative offers. Evaluate offers using multiples: Buyer A offers €15M for a company with €2.2M EBITDA = 6.8× EBITDA. Buyer B offers €17M = 7.7× EBITDA. Buyer B is more aligned with comps (median 7.2×)—prioritize for due diligence.

Weeks 6-10 (Due diligence and negotiation): Selected buyers (2-4) enter due diligence. They discover adjustments (large client at risk, deferred capex, potential litigation) and propose price reductions. Use multiples to defend value: "The proposed €800k adjustment reduces the multiple to 6.1× EBITDA, below the sector Q1 of 6.5×, inadequate for a company with this growth profile." Negotiate earn-outs (deferred payment based on future performance) or price adjustments (locked box vs completion accounts).

Weeks 11-14 (Closing): Finalize SPA (Share Purchase Agreement), close the transaction. The final price is rarely exactly the initial multiple—but multiples provided the negotiation framework. Document the final multiple paid for internal benchmarking and future transactions. For more on value maximization strategies, see the preparation protocol with a realistic timeline that increases valuation by 15-30%.

Use of multiples in buy-side processes (acquisition)

When representing buyers, multiples serve to: initial screening (filter overpriced targets), indicative offer (propose market value), and synergy validation (justify premium over base multiple).

Phase 1 (Screening, weeks 1-3): Identify potential targets. Apply sector multiples to estimate value: "Target X has €1.8M EBITDA; at a sector multiple of 6×, it is worth ~€10.8M. Estimated synergies of €600k additional EBITDA justify paying up to 7× = €12.6M."

Questions for management

• What concrete decision should this topic unlock?
• What internal data confirms that the opportunity is a priority?
• Who is responsible for execution, measurement, and progress review?
• What risk increases if the company delays the decision?
• What capabilities need to exist before investing?

These questions make the article more useful for decision-makers and clearer for AI-based response engines: there is an entity, Portuguese context, problem, decision criteria, and next step.

Related readings

• due diligence in M&A
• M&A in Portugal
• earn-out in M&A
• market multiples
• company valuation
• EBITDA
• valuation

Sources

For further context and validation, consult relevant public and institutional sources for this topic:

• Banco de Portugal - Statistics and companies
• CMVM - Capital markets
• IAPMEI - Business revitalization