How do I compare an offer with an EBITDA multiple?

Convert the offer to an enterprise value, divide by maintainable adjusted EBITDA, then compare the implied multiple with the published range for your sector and size band.

Is a high headline offer necessarily a strong offer?

Not on its own. A high headline with most of the money deferred or conditional can be worth less in practice than a lower offer paid in cash at completion.

Why does cash at completion matter?

It is the only part of the consideration that is certain on the day. Everything else depends on future performance, solvency and the terms of the agreement.

What is the difference between deferred consideration and an earn-out?

Deferred consideration is a fixed amount payable later. An earn-out is conditional and varies with post-completion performance, so it may be paid in part or not at all.

Can an offer above the sector range still be unattractive?

Yes. Restrictive warranties, a long earn-out, tight working-capital targets or a heavy handover commitment can outweigh a headline premium.

What information should be checked before accepting heads of terms?

The definition of debt and debt-like items, the working-capital mechanism, earn-out measurement, restrictive covenants, exclusivity, warranty caps and what happens if funding falls away.

Should I obtain independent advice before responding?

Yes. Heads of terms set the commercial framework for the whole transaction and are difficult to renegotiate later.

Business valuation calculators

Offer Sense-Check Calculator

Understand the implied multiple and the structure behind an offer you have received

In short

To sense-check an offer, divide the enterprise value offered by your adjusted EBITDA to get the implied multiple, then compare it with published guidance for your sector and size band. Repeat the calculation on certain cash at completion only. A strong headline supported largely by an earn-out is a weaker offer than it looks.

An offer is a structure as much as a number. This calculator derives the implied multiple and shows how much of the headline figure is payable at completion rather than deferred or conditional.

Part of the business valuation calculators suite from BusinessValuation.co.uk. Your result is saved in this browser, so you can compare it with your other calculator results.

How to use this calculator

Enter the headline offer, your maintainable adjusted EBITDA and the proposed payment structure. The calculator will show the implied multiple and how much of the consideration is payable immediately, deferred, conditional or retained.

The offer

Offer received

£3,500,000

Adjusted EBITDA

Use the figure from the adjusted EBITDA calculator.

£700,000

Sector

Structure of the offer

These should total 100 per cent.

Upfront cash

Deferred consideration

Earn-out

Exclusivity requested

In months.

Other offers on the table

Offer sense-check

Implied EBITDA multiple

Position against published guidance: Select a sector to compare
Published sector guidance: Select a sector
Certain cash at completion: £2,450,000
Dependent on future events: £1,050,000
Multiple on certain cash only: 3.5x

Select a sector to compare

Choose your sector to compare the implied multiple against published guidance for UK SMEs.

Points to consider

A long exclusivity period reduces your leverage and your ability to test the market.
With no other offers on the table there is no competitive tension to support the price.

Before you rely on this

This is a sense check, not a valuation or a recommendation to accept or reject an offer.
Sector ranges are guidance. Customer concentration, recurring revenue, growth, management depth, owner dependence, working capital and deal terms may justify a materially different figure.
Offer terms require independent review before heads of terms are signed.

Next steps

Your result is above and stays visible. If it would help, we can send it to you or review it with you confidentially.

Important information

This calculator provides general, indicative guidance based solely on the information entered. It is not a formal business valuation, tax calculation, legal opinion or recommendation to accept or reject an offer. Actual value and sale proceeds depend on detailed financial, commercial and transaction-specific factors.

How this calculation works

Implied multiple = enterprise value offered ÷ adjusted EBITDA
Implied multiple on certain cash = cash at completion ÷ adjusted EBITDA
Certain proportion = cash at completion ÷ total consideration offered

Worked example: £3.6m offer on £600,000 adjusted EBITDA

Worked example: £3.6m offer on £600,000 adjusted EBITDA
Adjusted EBITDA	£600,000
Headline enterprise value offered	£3,600,000
Implied headline multiple	6.0x
Cash at completion	£2,400,000
Earn-out over two years	£1,200,000
Implied multiple on certain cash	4.0x
Certain proportion of consideration	67%

The same offer reads as 6.0x or 4.0x depending on whether you count conditional money. Both figures are true, and a buyer's willingness to move certain cash toward the headline tells you more than the headline itself.

What each input means

Adjusted EBITDA: Maintainable earnings, not reported profit. An inflated denominator flatters the offer.
Enterprise value offered: The headline price, before debt, cash and working-capital adjustments.
Consideration structure: Cash at completion, fixed deferred amounts, earn-out and any retention.
Sector and size band: Used to compare the implied multiple with published UK SME guidance.

How to read the result

The implied multiple places the offer against general guidance for businesses of your type and size. A position below the range is not automatically wrong: concentration, owner dependency or volatile earnings can justify it. It tells you which questions to ask.

What can materially change the result

Whether your adjusted EBITDA would survive the buyer's diligence.
Customer concentration, contract quality and owner dependency.
How much consideration is conditional and how the conditions are defined.
Whether the buyer is a trade acquirer, private equity investor or management team.
Competitive tension: a single unsolicited bidder rarely opens at their ceiling.

Limitations

Published ranges are general guidance for UK SMEs, not a quotation for your business.
It does not read the legal terms that determine whether deferred money is ever paid.
It does not calculate your proceeds after debt, working capital or tax.
It is not a recommendation to accept or reject any offer.

When this calculator is appropriate

Use it when an offer or approach has arrived and you need an independent reference point before replying or signing exclusivity.

When it is not appropriate

Do not rely on it alone to respond to a formal offer. The drafted terms and a proper valuation view matter more than the arithmetic.

Bottom line

Judge an offer on the multiple implied by certain cash, not the headline. Structure often moves value more than price does.

Questions owners ask

How do I compare an offer with an EBITDA multiple?: Convert the offer to an enterprise value, divide by maintainable adjusted EBITDA, then compare the implied multiple with the published range for your sector and size band.
Is a high headline offer necessarily a strong offer?: Not on its own. A high headline with most of the money deferred or conditional can be worth less in practice than a lower offer paid in cash at completion.
Why does cash at completion matter?: It is the only part of the consideration that is certain on the day. Everything else depends on future performance, solvency and the terms of the agreement.
What is the difference between deferred consideration and an earn-out?: Deferred consideration is a fixed amount payable later. An earn-out is conditional and varies with post-completion performance, so it may be paid in part or not at all.
Can an offer above the sector range still be unattractive?: Yes. Restrictive warranties, a long earn-out, tight working-capital targets or a heavy handover commitment can outweigh a headline premium.
What information should be checked before accepting heads of terms?: The definition of debt and debt-like items, the working-capital mechanism, earn-out measurement, restrictive covenants, exclusivity, warranty caps and what happens if funding falls away.
Should I obtain independent advice before responding?: Yes. Heads of terms set the commercial framework for the whole transaction and are difficult to renegotiate later.

Talk your figures through with us

A free initial consultation with our team, then a short written indicative range where the situation warrants it. No obligation.

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