EBITDA or revenue multiple? What really drives valuation in today’s market
In the current Australian M&A environment, most privately owned businesses are valued on EBITDA, not revenue. Buyers are focused on cash flow, not top-line hype. While revenue multiples do exist, they’re reserved for a narrow set of businesses that operate like true scale-ups.
This distinction matters more than ever. The mid-market is facing headwinds: deal value is down 22%, volume down 14%, and regulatory scrutiny is tightening. In this climate, valuation discipline is high and buyer expectations are sharper. Founders chasing inflated revenue multiples without the fundamentals risk misalignment and missed opportunities.
Why this matters now
Australia’s M&A market is split. Large-cap deals are booming, deal value surged 101% year-on-year to $97.4 billion. But the mid-market is grappling with uncertainty. Regulatory changes, election jitters and global trade tensions are reshaping buyer behaviour.
At the same time, advisory demand is rising. Strategic acquisitions are still happening across sectors like infrastructure, healthcare, and manufacturing. But buyers are more selective. They’re looking for businesses with real earnings, clean metrics and a clear path to scale.
When revenue multiples apply
Revenue multiples are rare and they’re earned, not assumed. If your business meets most of the following criteria, a revenue-based valuation might be possible:
Strong year-on-year growth: 50–100% or more, sustained over time
Recurring revenue: genuine subscription or ARR, low churn, expanding cohorts
Solid unit economics: CAC payback under 12 months, LTV/CAC above 3x
A large, reachable market: with a clear plan to win share using capital
Operating leverage: improving gross margins as revenue grows
If not, you’re almost certainly in EBITDA territory, and that’s where most great deals get done across services, manufacturing, distribution and infrastructure.
What buyers really value
From MSA’s advisory experience, buyers are looking for:
Business model resilience: subscription beats project work; recurring beats “repeat if we’re lucky”
Clean metrics: consistent growth, low churn, expanding customers, strong gross margins
Scalable teams: founders who’ve scaled before, or show they’re learning fast
Strategic fit: logical acquirers who value speed-to-scale, not just any buyer with cash
MSA’s approach: EBITDA+ SIX STEPS TO SUCCESS™
Morgan Shaw Advisory’s valuation methodology helps sellers:
Identify the valuation gap between owner expectations and buyer reality
Uncover hidden value in strategic positioning, client relationships and operational efficiency
Prepare for negotiation with a clear understanding of buyer motivations and deal structure dynamics
Use NBIOs (non-binding indicative offers) as leverage to secure the best deal terms
This framework is designed to help founders build defensible value and close deals with confidence.
Before chasing a revenue multiple, ask yourself:
Is your growth truly explosive and sustained?
Do you have real ARR or subscription revenue with low churn?
Are your unit economics strong and improving?
Can you scale efficiently with more capital?
Are buyers likely to see strategic upside beyond your current earnings?
If not, focus on building quality EBITDA and preparing for a defensible valuation.
Want to know if your business is valuation-ready? Download MSA’s Valuation Readiness Checklist or book a confidential consult. Visit MSA Resources to explore more insights on deal preparation, negotiation strategy and market trends.