Module II· Trading ComparablesIntermediate
Question
Why do European multiples often trade lower than US multiples for comparable businesses?
Answer
Structural reasons:
- Lower-liquidity discount: European markets have a shallower pool of buyers and less trading volume.
- ERP difference: the European ERP is historically slightly higher than the US (~6.0% vs. ~5.5%).
- Growth difference: US sectors often grow faster (a heavier tech weighting).
- Free-float levels: European companies often have anchor investors (families, foundations) − lower free float − liquidity discount.
- Multiple inflation in the US driven by retail trading (the Robinhood effect).
Deep diveShow more details
Consequence
European EV/EBITDA for industrial mid-caps is typically 7−9x, the US 9−12x.
Pitch tip
When US comps are used in a European pitch, show a '20−25% multiple adjustment for region/liquidity' explicitly.