EV/EBITDA Explained
EV/EBITDA = Enterprise Value / EBITDA
EV/EBITDA measures how expensive a business is relative to its operating cash generation. It's the most widely used acquisition multiple because it's capital-structure neutral and removes the effect of depreciation policies.
Industry Benchmarks
| Industry | Typical EV/EBITDA |
|---|---|
| Technology / SaaS | 20–40× |
| Healthcare | 12–18× |
| Consumer goods | 10–15× |
| Manufacturing | 7–12× |
| Oil & Gas | 5–8× |
| Utilities | 8–12× |
| Private equity buyouts | 6–10× |
Why EV/EBITDA Over P/E?
- Unaffected by capital structure differences (leverage doesn't distort it)
- Removes depreciation accounting differences
- Works for companies with no earnings (EBITDA > net income)
- Standard language in M&A conversations
What Drives a Higher Multiple?
- Higher growth rate
- Recurring/subscription revenue
- High switching costs / moat
- Strong gross margins
- Management track record
Use the Enterprise Value Calculator to compute EV/EBITDA and EV/Revenue multiples.