Multiple expansion
Selling a business at a higher multiple than you paid for it. It is one of the levers in the value creation bridge, alongside revenue growth, margin improvement and debt paydown.
Multiple expansion in practice
Buying at eight times and selling at ten adds two turns of value without the business earning a single dollar more. Relying on it means assuming the market pays more later.
Shayne Fitz-Coy’s definition of Multiple expansion
Entry multiples have risen and this lever has mostly closed. Around 2015 an average deal picked up roughly 2.5 turns.
One of the strongest deals of the last decade got 3.2 turns. Treat multiple expansion as a possible gift, and underwrite the return without it.
Terms Related to Multiple expansion
Entry multiple · Exit multiple · MOIC · Multiple · Multiple arbitrage · The Death of Cheap Debt · All of the glossary