EBITDA multiple (multiple d’EBE)

The EBITDA multiple, multiple d’EBE in French, is the ratio between the value of a business and its EBE, the French measure closest to EBITDA. It is used to estimate the value of a hotel business or hotel company, and to compare transactions. It is a cross-check: it replaces neither the analysis of trading nor the other valuation approaches.

Calculation

Enterprise value = adjusted EBITDA × multiple

Equity value = enterprise value − net debt, with the working capital adjustments set in the agreement

The EBITDA used is a normalised figure, adjusted to reflect what the asset will generate in a buyer’s hands: owner’s pay brought to market level, intra-group rent brought to market level, one-off items stripped out. Each adjustment must be backed by a document, because the buyer will recalculate them all. Reading a multiple means knowing which EBITDA it applies to: reported or adjusted, historical, last twelve months or forecast.

In the hotel sector

The multiple varies from one asset to another. The main drivers:

• the perimeter: business only, whose EBITDA is after rent, or property and business together
• location and depth of demand
• category, positioning and reliance on a brand
• the lease: remaining term, rent as a share of revenue, risk of an uncapped rent review
• the condition of the asset and CAPEX required, which are deducted
• the consistency of EBITDA and its reliance on the owner-manager
• financing conditions at the time of the deal

Not to be confused with

• The capitalisation rate, which relates income to the value of a building.
• A business-only multiple and a multiple applied to property and business together, which cannot be compared.

A reasoned valuation cross-checks these methods and documents every assumption.