Module V· Premium / ROIC / Value Creation AnalysisAdvanced
Question

How does multiple compression / expansion affect the value-creation story?

Answer

If the buyer pays a high entry multiple but exit or trading multiples compress, value creation must come from EBITDA growth, synergies, and cash generation. Multiple expansion can boost returns but is not controllable. In pitches, show implied exit multiple and sensitivity. A story relying mainly on multiple expansion is weaker than one based on operating improvement.