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Reply To: My business have been valued at 3.5 times EBIT. In light of massive losses In March, April, May and most likely June, can these losses be ‘normalised’ i.e removed in a a valuation? Or is that just a discussion to be had with a purchaser. Also, for a service based business being bought my another service business, what is the spectrum or cash vs workout that is considered normal?

Hi Mark,
In my view 1/3rd left as equity is not typical in my experience and is not a great outcome for the vendor… but of course this depends on the transaction arrangement and business concerned (tech business perhaps). A clean deal is best if price can be preserved as there is nothing worse being the previous owner, having no real say or control and watching changes being made to what you had built, let alone being left with a minority shareholding with no real exit option other than the purchaser you just sold it to and they call the shots on value going forward unless another buyer if found… or there is a pre-agreed exit arrangement or a put option at an agreed multiple at best.
Cheers
Jonathan