Valuation multiples by sector: EV/EBITDA in industrial SMEs

When an industrial business owner starts to wonder what the company is worth, almost the same question always comes up: "how many times EBITDA is my sector trading at?". Valuation multiples —and EV/EBITDA in particular— have become the common language of company sale transactions. They are quick to calculate, easy to communicate and they allow deals to be compared. But they are also a tool that, used badly, leads to unrealistic expectations and to negotiations that derail.

This guide explains what a valuation multiple is, how EV/EBITDA is built, why it varies so much from one sector to another and how the owner of an industrial SME should read the benchmarks that circulate in the market. The aim is not to give you a magic number —there is none— but to help you understand the logic behind the figure, so that you arrive better prepared at a transaction.

What a valuation multiple is

A valuation multiple is a ratio that links the value of a company to a reference financial figure, normally its profits. The underlying idea is simple: if comparable companies in your sector are bought and sold at a given number of times their profits, your company should be valued in a similar range, adjusted for its own particular circumstances.

Multiples are part of the market comparables method, one of the three main families of valuation alongside discounted cash flow (DCF) and asset-based methods. For an overview of all of them, see our guide to how much your company is worth and the valuation methods.

The strength of the multiples approach is that it is anchored in the real market: it reflects what buyers have actually been willing to pay in recent deals. Its limitation is that no multiple on its own captures what makes a particular company unique.

EV/EBITDA: the benchmark multiple in M&A

In company sale transactions, the most widely used multiple is EV/EBITDA, which relates Enterprise Value to EBITDA (earnings before interest, taxes, depreciation and amortisation).

Why EV and not the share price

Enterprise Value represents the value of the operating business regardless of how it is financed. In simplified terms, it is calculated by adding net financial debt to the value of the equity:

Enterprise Value = Equity value (fondos propios) + Net financial debt (debt − cash)

This makes it possible to compare companies with different financing structures. Two companies that are identical in their operations but carry different levels of debt will have roughly the same Enterprise Value, even though the price their shareholders receive (the equity value) is different. That is why, when people say that "a sector trades at 6 times EBITDA", that 6x almost always refers to Enterprise Value, not to the price the seller will collect.

Why EBITDA

EBITDA is used as a proxy for the cash generating capacity of the business before the effect of financing, taxes and accounting decisions on depreciation. It is a figure that allows the operating profitability of companies with very different investment policies or tax structures to be compared.

One warning is worth keeping in mind: EBITDA is not cash flow. It does not deduct the investment needed to keep the business running (capital expenditure) or the movements in working capital. In capital-intensive industrial sectors, where keeping machinery up to date demands constant investment, a high EBITDA can sit alongside modest cash generation. That is one of the reasons why the same multiple means different things depending on the sector.

Why multiples vary from sector to sector

The question "how many times EBITDA does it trade at?" has no single answer, because the equilibrium multiple depends on the economics of each activity. The main factors that explain the differences between sectors are:

• Expected growth. A sector with sustained growth prospects justifies higher multiples, because the buyer pays not only for current profits but for future ones.
• Capital intensity. Activities that need a good part of EBITDA reinvested in machinery and plant convert a smaller share of that EBITDA into available cash, which pushes multiples down.
• Stability and recurrence of revenue. Businesses with recurring revenue, long-term contracts or high customer loyalty are valued at a premium over cyclical activities or those that depend on one-off projects.
• Margins and pricing power. A company able to defend its margins with suppliers and customers is seen as less risky.
• Risk and cyclicality. Sectors heavily exposed to the economic cycle or to volatile raw materials tend to be valued at a discount.

These forces explain why, within manufacturing, a specialised components business with recurring customers can be valued in a very different range from a basic processing activity under heavy price competition, even when both have a similar EBITDA.

Sector multiple benchmarks: how to use them

There are databases that compile multiples by sector. In academia, the series published by Aswath Damodaran (NYU Stern) give EV/EBITDA ratios by industry and region, updated annually, and they are a standard methodological reference for understanding the relative differences between sectors. In the Iberian transaction market, providers such as TTR Data compile information on M&A deals in Spain, including sector analysis of the activity.

One important warning: most of these benchmarks come from listed companies or large transactions, which are not directly comparable to an industrial SME. Applying a listed company multiple to a family-owned SME without adjustment is one of the most frequent and most expensive mistakes. That is why, rather than offering you a table of fixed figures here that could be misleading, we prefer to explain the adjustments that separate those benchmarks from the real value of your company.

From the listed multiple to the value of your SME: the discounts

SMEs are not valued at the same multiples as large listed companies. Several downward adjustments are usually applied to the sector benchmark:

• Size discount. Smaller companies are considered riskier (greater dependence on a few customers, less diversification) and are valued at lower multiples.
• Illiquidity discount. Shares in an unlisted SME cannot be sold on an organised market, which reduces their value against a listed share.
• Owner dependence discount. If the business relies too heavily on the founder —commercial relationships, technical knowledge, decisions— the buyer sees a continuity risk that brings the price down.
• EBITDA normalisation adjustments. Before the multiple is applied, EBITDA has to be stripped of non-recurring items and of owner costs that a buyer would not take on. This normalised EBITDA is often higher than the accounting figure and is the correct basis for the negotiation.

These adjustments are documented and discussed during due diligence, the process in which the buyer verifies the figures and the risks of the business. Reaching that stage with a properly normalised EBITDA, backed by well-ordered information, is one of the levers with the greatest impact on the final price.

An example of the calculation logic (with no invented market figures)

To fix ideas, it helps to see how the pieces fit together, using purely illustrative values that do not represent any real market benchmark. Imagine an industrial company with an accounting EBITDA of €1,000,000 which, after normalising non-recurring items and an owner's salary above market rates, produces a normalised EBITDA of €1,200,000.

If a multiple of, say, 5x were considered reasonable for its profile and subsector —a figure that should only be set with a real comparables analysis— the starting Enterprise Value would be €6,000,000. From that figure you would have to deduct net financial debt to arrive at the equity value, that is, what the shareholders would receive. With net debt of €1,000,000, the price for the seller before tax would be around €5,000,000.

This example illustrates two key lessons: first, that normalising EBITDA can lift the starting point significantly; and second, that Enterprise Value and the price the seller collects are not the same thing. The number that ultimately matters is not the multiple itself but the result of the whole chain of adjustments. That is why we insist that no multiple on its own amounts to a valuation.

The tax factor: what the seller keeps

Talking about multiples without talking about tax gives an incomplete picture. The agreed price and what the owner finally receives can differ considerably depending on how the transaction is structured.

When an individual sells shares in their company, the capital gain is taxed in the savings base of IRPF, the Spanish personal income tax, at progressive rates that in 2025 run from 19% (up to €6,000) to 28% (from €300,000), with intermediate bands of 21%, 23% and 27% (Spanish Tax Agency; the legal basis is Ley 35/2006, the Spanish personal income tax act). In transactions of any size, this means that a relevant part of the gain goes to tax.

Planning ahead makes it possible to optimise that burden legally. Structures such as a holding company can apply, where the requirements are met, the Spanish tax neutrality regime (régimen de neutralidad fiscal) and the exemption for dividends and capital gains on qualifying shareholdings. We analyse these alternatives in detail in our guide to the tax treatment of a company sale and the role of the holding company.

In the case of a family business, two tax benefits are worth remembering, because they shape wealth and succession planning: the exemption under Impuesto sobre el Patrimonio (Spanish wealth tax) for shareholdings that meet the requirements of article 4.Ocho.Dos of Ley 19/1991 —a holding of at least 5% individually or 20% across the family group, the exercise of management duties, and remuneration accounting for more than 50% of the holder's earnings— and the 95% reduction under Impuesto sobre Sucesiones y Donaciones (Spanish inheritance and gift tax) for the transfer of a family business, set out in article 20 of Ley 29/1987 (subject to holding requirements). These regimes do not affect the valuation multiple itself, but they do decisively shape the planning of who transfers the company and how.

How to use multiples well: practical recommendations

For multiples to be a useful tool rather than a source of frustration, a few principles are worth following:

1. Do not take an isolated multiple as a value. Use it as a starting point and triangulate it with other methods, especially discounted cash flow.
2. Make sure you are comparing like with like. Check that the benchmarks come from companies of a similar size, sector and risk profile to your own.
3. Normalise EBITDA before applying the multiple. A clean, well-documented EBITDA changes the result substantially.
4. Distinguish Enterprise Value from the price for the seller. Deduct net financial debt to know what the shareholders will actually receive.
5. Bring tax into the calculation. What matters is not the gross price but what is left after tax and after efficient structuring.

A professional valuation combines these elements into a rigorous analysis that stands up in front of a buyer. If you are considering a sale, or you need to know the real value of your company before taking decisions, our business valuation service works with sector multiples, discounted cash flow and EBITDA normalisation to build a solid value range and guide the negotiation.

Frequently asked questions

How many times EBITDA does an industrial SME sell for?

There is no single figure. The multiple depends on the subsector, on growth, on the recurrence of revenue, on capital intensity and on the risk profile of each company. On top of that, SMEs are valued at a discount to large listed companies because of their smaller size, their illiquidity and their dependence on the owner. The only reliable way to obtain a realistic range is a professional valuation that normalises EBITDA and triangulates several methods.

What is the difference between Enterprise Value and the price the seller receives?

Enterprise Value is the value of the operating business, independent of how it is financed. The price the shareholders receive (equity value) is obtained by deducting net financial debt. That is why a multiple "on EBITDA" that looks attractive can translate into a smaller payment if the company carries debt.

Why does my accounting EBITDA not match the one used for the valuation?

Because EBITDA is normalised before the multiple is applied: non-recurring items, the owner's personal expenses or above-market salaries are removed, and unusual income is adjusted. That normalised EBITDA reflects the sustainable profitability of the business and is usually the correct basis for the negotiation.

Does tax change what I receive from the sale very much?

Yes. The capital gain is taxed in the savings base of IRPF at rates that reach 28% in 2025. Planning ahead —through a holding structure that meets the requirements, for example— can optimise that burden legally. It is worth analysing the tax position before starting the sale process, not afterwards.

Are listed company multiples any use for valuing my SME?

As a methodological reference yes, but never directly. Listed companies are larger, more diversified and more liquid, so they are valued at premiums that do not apply to an SME. Applying a listed multiple to a family business without adjustment is one of the most common valuation mistakes.

Sources

• Aswath Damodaran (NYU Stern), EV/EBITDA multiple series by industry and region (updated annually). pages.stern.nyu.edu/~adamodar
• TTR Data (Transactional Track Record), market information on M&A transactions in Spain. ttrdata.com
• Instituto de la Empresa Familiar (the Spanish family business institute), figures on family businesses in Spain (around 89% of all companies, 57% of private sector GDP and 67% of private employment). iefamiliar.com
• Ley 19/1991, the Spanish wealth tax act, article 4.Ocho.Dos (exemption for family business shareholdings). BOE.
• Ley 29/1987, the Spanish inheritance and gift tax act, article 20 (95% reduction for the transfer of a family business). BOE.
• Ley 35/2006, the Spanish personal income tax act, and the savings base rates in force in 2025. Spanish Tax Agency (AEAT).