Module IV· ExitIntermediate
Question
Which factors typically influence the exit multiple?
Answer
What
The exit multiple is driven by sector, macroeconomic, and company-specific factors — not a single-point estimate, but a sensitivity range.
Top drivers
- Sector sentiment: software 12–18x, industrials 6–9x.
- EBITDA growth rate: above 10% p.a. +1–2x, below 5% −1x.
- Recurring revenue %: for software above 70%, +2–4x.
- Customer concentration: top-3 above 30% of revenue, −10–20%.
- Market phase (bull/bear): a bull phase adds +2–3x over the cycle average.
Deep diveShow more details
Multiple drivers in the middle market
| Factor | Multiple effect | Typical |
|---|---|---|
| Sector sentiment | high | Software 12–18x, industrials 6–9x |
| Size / EBITDA | medium | <$20m: −15%; >$50m: +10% |
| Margin profile | medium | EBITDA margin >25%: +0.5–1x |
| Recurring revenue | high (software) | >70%: +2–4x |
| Family- vs sponsor-owned | medium | family-owned: −5–10% |
Typical sensitivity model
| EBITDA Year 5 \ Exit Multiple | 7.0x | 8.5x | 10.0x |
|---|---|---|---|
| $50m | $350 | $425 | $500 |
| $60m | $420 | $510 | $600 |
| $70m | $490 | $595 | $700 |
Pitch tip
Question: "Which multiple driver is the most sensitive?"
Answer: "Sector sentiment and the EBITDA growth rate. In machinery, a 10%+ growth CAGR earns a premium multiple, otherwise a discount. In the middle market it also matters whether the target is international or domestic-only — the former widens the buyer pool to Asian and US strategics"