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Valuation ranges are extending

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Nathaniel Cooper

Clearwater International’s UK Partner, Nathaniel Cooper comments:

“The evolution of leading digital business models has resulted in very attractive valuation multiples in the private market. These have persisted through recent market turmoil. We have seen EBITDA multiples of mid-teens current year EBITDA and almost twice that on a historic EBITDA basis for the best businesses.

We note that if the business has not evolved, the valuation remains in-line with historical norms. However, the top end of this range will extend for those exploiting technology, data and high growth specialisms underpinned by high margins and recurring revenue streams”.

Publicly traded agency groups have had a tough nine months, with our equally weighted index now trading at an average of 6.7x EBITDA. S4 now trades at the average multiple of 6.7x, after a series of profit warnings and concerns over spiralling staff costs. Amongst a volatile macroeconomic backdrop, it remains to be seen how multiples progress over the next quarter and beyond.

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