Multiple arbitrage
An implied valuation uplift when an acquired business is valued at a higher comparable multiple as part of a platform or combined group than at acquisition. The gap is not guaranteed or necessarily realized.
Multiple arbitrage in round numbers
Hypothetical, with the same annual earnings before interest, taxes, depreciation and amortization (EBITDA) of US$2m: a 5x acquisition multiple implies enterprise value of US$10m. Applying an assumed 10x platform multiple to that same EBITDA implies US$20m of attributable enterprise value, a US$10m gross implied uplift before costs and other adjustments. This is not a completed sale or realized profit.
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| Measure | Calculation |
|---|---|
| Acquisition enterprise value | 2 × 5 = 10 |
| Implied platform-attributable enterprise value | 2 × 10 = 20 |
| Gross implied uplift before costs | 20 − 10 = 10 |
Terms Related to Multiple arbitrage
Bolt-on acquisition · Platform company · Roll-up · Equity story · Multiple expansion · All of the glossary