Module II· Precedent TransactionsIntermediate
Question
What is the difference between 'paid' and 'implied' multiples?
Answer
Mechanics
- Paid multiple — what the buyer actually paid.
- Implied multiple — what the buyer would have valued on a "standalone" basis, without synergies.
Formulas
```
Paid Multiple = Deal Value / Target EBITDA at Closing
Implied Multiple = (Deal Value − Synergy Value) / Target EBITDA
```
Deep diveShow more details
Example — strategic deal with synergies
Inputs:
- Deal Value: $1,000m
- Target EBITDA: $100m
- Cost Synergies (run-rate): $15m
- Synergy Multiple (buyer's view): 8x
Calculation:
```
Paid Multiple = $1,000 / $100 = 10.0x
Synergy Value = $15 × 8 = $120m
Implied Multiple = ($1,000 − $120) / $100 = 8.8x
```
Consequence
For strategic buyers, paid is systematically above implied — the difference is what the buyer pays for its synergies. For financial buyers (PE), paid ≈ implied typically holds, because no proprietary synergies are priced in.
Pitch tip
"We show both paid and implied multiples; the range for our valuation floor is based on implied (synergy-free)."