Why do some companies sell for higher multiples?
Four reasons account for nearly all of it: size, growth, revenue quality and independence from the owner. Only the first has published numbers behind it.
Almost entirely four things: size, growth, revenue quality and independence from the owner. Owners tend to assume the difference is negotiation. It very rarely is — a higher multiple is usually a different business, not a better conversation.
The four, and how well each is evidenced
| Factor | Why a buyer cares | How well evidenced |
|---|---|---|
| Size of earnings | Institutional buyers can bid | Strongly — it replicates across four datasets |
| Growth | The years being bought get bigger | Partly — one bundled premium figure exists |
| Revenue quality | Next year is visible on a document | By mechanism only, no measured effect |
| Independence from the owner | The business survives the transaction | By mechanism only, no measured effect |
Only the first has published numbers behind it. GF Data's cumulative figures run from 5.9× EBITDA at $10–25m of enterprise value to 9.9× at $250–500m across 5,461 transactions, and the same gradient appears in Dutch, UK and eurozone data. For the other three, the direction is well argued and the magnitude is not published anywhere we could find. See does company size affect the multiple for the evidence, and where SME multiples actually come from for why the specific adjustments quoted elsewhere are smaller than the disagreement between the datasets that would have to detect them.
What competitors are usually not doing
They are not negotiating harder, and they did not find a naive buyer. When a business in your sector sells at eight times and yours is offered five, the difference is generally that theirs had a management layer, contracted revenue, or three times your earnings.
That is useful information rather than discouraging information, because all three are things you can change with enough runway.
The one exception
Strategic buyers occasionally pay above the range because the acquisition is worth more inside their business than it is on its own — they are buying your customer list, your team or your market access, and pricing it against their own economics rather than yours. Those outcomes exist, but they are found by knowing which buyer to approach, not by holding out for a better number.
EBITDA multiple explained covers the drivers; how recurring revenue affects valuation covers the largest single one.