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EBITDA valuation calculator: the price range a buyout will be built on
Every management buyout is priced on adjusted EBITDA and a multiple. Normalise the earnings, set the multiple range for the sector, deduct net debt and the calculator gives the enterprise and equity value range the negotiation, and the funding, will revolve around.
Enterprise value is adjusted EBITDA times the multiple; equity value deducts net debt and adds surplus cash. Multiples for UK owner-managed businesses commonly sit between 3x and 7x depending on sector, size and growth. Illustrative only, not a valuation.
A price the vendor wants and a price the debt will support are two different numbers. We show the team both before anyone negotiates.
Why funders care about the adjustments more than the multiple
A multiple is an opinion; adjusted EBITDA is a claim that has to survive due diligence. If the owner has been paying themselves £60,000 for a role that will cost £150,000 to fill, the add-back becomes a deduction. If last year's "one-off" bad debt has happened three years running, it is not one-off. Funders lend against the EBITDA they believe will recur, which is why the number that drives the price and the number that drives the debt are often different, and why the team should know both before agreeing anything.
From valuation to funding
Once the range is set, the question becomes how much of it the funding will reach. Run the mid-point through the funding structure calculator to see the senior debt, vendor loan and equity gap, and read our guide to management buyout valuation for the EBITDA bridge and the multiples by sector. The gap between what a vendor wants and what the debt supports is where most of the structuring work happens.
Valuation questions, answered
How do you value a business for a management buyout?+
Adjusted EBITDA multiplied by a sector multiple gives enterprise value; deduct net debt and add any surplus cash to reach the equity value the shareholders receive. The adjustments matter more than the multiple: owner pay above market, one-off costs and the salary of a replacement for a departing owner all change the number a funder will lend against.
What EBITDA multiple do UK private companies sell for?+
Most owner-managed businesses change hands between roughly 3x and 7x adjusted EBITDA, with smaller, owner-dependent or cyclical businesses at the bottom of the range and larger, growing, contracted-revenue businesses at the top. Published deal databases such as Experian MarketIQ and the BVCA track the range; we describe it as a band rather than quote a point value.
What is the difference between enterprise value and equity value?+
Enterprise value is the value of the whole business regardless of how it is financed. Equity value is what the shareholders actually get after the lenders are repaid: enterprise value less net debt, plus any cash above what the business needs to trade. In an MBO the funding is raised against enterprise value and the vendor is paid equity value.
What are EBITDA add-backs?+
Costs in the accounts that a new owner would not incur: the owner's salary and benefits above a market rate for the role, family members on the payroll who do not work in the business, one-off legal or restructuring costs, and personal expenses run through the company. Funders accept add-backs that are documented and defensible, and discount those that are not.
Will a lender fund the full valuation?+
No. Debt typically funds 50 to 70 percent of the price; the rest comes from the team, the vendor deferring part of the price and, on larger deals, an equity investor. A valuation the funding cannot reach is a negotiation, not a deal, which is why we model the funding ceiling alongside the valuation range.