How do you adjust precedent multiples for synergies?
If the universe contains strategic deals, a synergy premium is priced into the multiple. Adjustment to recover "pure standalone pricing":
```
Synergy Value = Cost Synergies × 8x + Revenue Synergies × 6x
Seller Share = Synergy Value × 50% (typical allocation)
Standalone EV = Strategic Deal EV − Seller Share
Adj. Multiple = Standalone EV / Target EBITDA
```
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Inputs:
- Deal EV (paid): $1,000m
- Target EBITDA: $100m
- Cost Synergies (run-rate): $30m
- Synergy Multiple: 8x
- Seller allocation: 50%
Calculation:
```
Synergy Value = $30 × 8 = $240m
Seller Share = $240 × 50% = $120m
Standalone EV = $1,000 − $120 = $880m
Adj. Multiple = $880 / $100 = 8.8x (vs. paid 10.0x)
```
Rarely worked through like this in IB — the standard is to show the paid multiple with the caveat "includes synergies". For clean strategic-vs.-financial comparisons or PE-buyer scenarios, the adjustment is still worth it.
"Strategic deals include ~14% synergy uplift over standalone — for a PE-buyer scenario we adjust roughly 1x EBITDA downward."