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Is there a rule of thumb for what I should pay in terms of a multiple for SDE? Distribution business.

I am interested in a distribution business (fastener industry) and wonder what multiple make sense.

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The BAF Group LLC

Mutiples are frequently not the way to price business sales. They may be okay for a rough targeting, but when push comes to shove, I believe that Net Profit and other intangibles are a much better method of determining price.

But even when doing rough guesses with multiples, it varies with the business. And what may be a good mutiple this year, may be different next year, depending upon the overal economy and that particular business' industrial trends. One of the biggest determinants, whichever way you measure pricing, is in the nature of the agreements the business may have with its customers. In distribution, do you have an "as needed" agreement with the Clients, or are there annual or multi-year agreements? If it is "as needed", the multiples are lower than if your clientele is locked in for any period of time.

Feb 18, 2011

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