For most owner-managers, the value of their business is the single most important number they will ever negotiate. Yet it is also one of the most misunderstood. This article explains how UK mid-market businesses are valued, what drives multiples up — and what drives them down.
The EBITDA multiple: what it is and why it matters
The starting point for valuing most owner-managed businesses is EBITDA — earnings before interest, tax, depreciation and amortisation. This is a proxy for the cash the business generates before financing and accounting adjustments, and it is the figure that acquirers use as their baseline for comparison across businesses and sectors.
Enterprise value is then expressed as a multiple of that EBITDA figure. A business generating £2m EBITDA sold for £14m has been acquired at 7x. One sold for £20m has been acquired at 10x. The multiple reflects the market’s assessment of quality, growth prospects, risk, and strategic value to a particular buyer — and it is the figure that a good M&A process is designed to maximise.
What multiples are businesses achieving right now?
In the current UK mid-market — broadly defined as businesses with enterprise values between £10m and £100m — multiples for good quality businesses typically range from 8x to 15x EBITDA. The range is wide because the multiple is not simply a function of size: it reflects the specific characteristics of each business and the competitive dynamics of each sale process.
At the upper end, technology and software businesses with recurring revenue and strong growth are consistently achieving 12x to 15x and above. Healthcare and life sciences businesses with defensible IP or regulated market positions command similar premiums. At the lower end, businesses in more commoditised sectors, or those with the value-reducing characteristics described below, may transact at 6x to 8x regardless of absolute EBITDA.
Sector dynamics can push multiples well beyond these ranges. Defence and aerospace supply chain businesses are currently among the most sought-after assets in the UK mid-market, driven by sustained increases in NATO defence spending and a limited supply of high-quality businesses with certified manufacturing capability and established programme relationships. A business supplying critical, proprietary technology — a novel counter-drone system using microwave disruption, for example — could realistically command a multiple in excess of 20x in a well-run competitive process today. Strategic scarcity drives price.
The factors that increase your multiple
Experienced acquirers pay for quality and predictability. The characteristics that reliably attract premium multiples are consistent across sectors:
Recurring or contracted revenue. A business where a significant proportion of revenue renews automatically — through subscriptions, long-term contracts, or framework agreements — is worth materially more than one dependent on transactional sales. Buyers are paying for certainty, and certainty commands a premium.
A management team that does not depend on the owner. One of the most common value destroyers in owner-managed businesses is a founder who is operationally indispensable. If the business cannot function without the current owner, buyers will either discount the price heavily or walk away. Building a strong second tier of management before a sale is one of the highest-return investments an owner can make.
Diversified customers. No single customer should represent more than 20–25% of revenue if avoidable. Concentration risk is one of the first things any buyer’s due diligence will identify, and it will be reflected in the price.
Growth momentum. Acquirers buy the future, not the past. A business with three years of consistent revenue and EBITDA growth, a strong forward order book, and a credible growth narrative will always command a higher multiple than one whose performance has plateaued, even if the absolute EBITDA figures are similar.
Proprietary products, IP, or market position. Businesses that own something — a patent, a certified process, an exclusive relationship, a brand with genuine recognition — are structurally more defensible and command corresponding premiums. This is particularly pronounced in industrial technology and defence supply chain, where certifications and programme approvals represent years of investment that a buyer cannot easily replicate.
The factors that reduce your multiple
Just as important as understanding what drives value up is understanding what drives it down — and addressing those factors before going to market.
| Value Reducer | Typical Impact | What to Do About It |
|---|---|---|
| Owner dependency | 1x–3x reduction in multiple | Promote and empower a second tier of management 12–24 months before sale |
| Customer concentration (>25% in one customer) | 1x–2x reduction; may deter some buyers entirely | Diversify the customer base; be transparent about renewal risk |
| Declining revenues | Severe — may make a business unsaleable at any acceptable price | Do not go to market during a downturn; stabilise performance first |
| Weak or thin management team | 1x–2x reduction; increases perceived execution risk | Invest in management depth; consider retention arrangements ahead of sale |
| No recurring revenue | 0.5x–1.5x reduction vs comparable businesses with contracts | Convert transactional relationships to contracted ones where possible |
The process premium: why a competitive sale always outperforms a bilateral deal
Perhaps the most important and least understood driver of value is the sale process itself. A business sold through a well-run competitive process — where multiple credible buyers are approached simultaneously, management presentations are carefully orchestrated, and indicative offers are received in parallel — will consistently achieve a higher multiple than the same business sold through a direct approach or a bilateral negotiation.
The reason is straightforward: competitive tension. When a buyer knows that other parties are looking at the same business, they price to win rather than to optimise. A business that might achieve 8x in a quiet bilateral process can achieve 11x or 12x in a properly run auction. That difference, on a business with £3m EBITDA, is £9m to £12m in additional proceeds to the vendor.
This is why the choice of advisor matters. An advisor with genuine market relationships — who can credibly approach the right buyers, run a disciplined process, and manage competitive tension through to completion — will more than recover their fee in the price achieved.
Achieving a clean exit: W&I insurance and locked-box mechanics
Two structural features of a well-negotiated sale can make a significant difference to the quality of a vendor’s exit — not just the headline price, but the certainty and finality of the proceeds received.
Warranties & Indemnities (W&I) insurance. In a traditional sale, the vendor provides a set of warranties about the business — its financial position, contracts, employees, litigation, tax history and so on. If a warranty proves to be incorrect, the buyer can bring a claim against the vendor, sometimes years after completion. This creates a tail of liability that can hang over a vendor long after the deal has closed, and typically requires a portion of the proceeds to be held in escrow as security.
W&I insurance transfers this risk to an insurer. The buyer claims against the policy rather than the vendor directly, and the vendor walks away with clean hands. In a well-run process, the transaction letter — the document that governs the terms on which exclusivity is granted — should require the acquirer to obtain W&I insurance as a condition of the deal structure. This is now standard practice in the UK mid-market and most institutional buyers will expect it. The premium is typically paid by the buyer and is modest relative to deal size. For a vendor, it is one of the most important protections available.
Locked-box pricing. Most sale agreements include a mechanism to adjust the purchase price after completion based on the actual level of working capital in the business at the point of transfer. In theory this is equitable; in practice it creates significant uncertainty for the vendor. Working capital is complex to define, the reference level is always contested, and the vendor — who is no longer running the business — has limited ability to influence or verify the numbers. Post-completion working capital disputes are one of the most common sources of friction in M&A transactions.
A locked-box structure eliminates this uncertainty entirely. Rather than adjusting the price after completion, the parties agree a fixed price based on a balance sheet at a historical “locked-box” date — typically the last audited accounts. From that date until completion, the vendor simply ensures that no value leaks out of the business (through dividends, related-party payments, or other distributions). The price the vendor receives is the price agreed at signing, with no post-completion adjustment mechanism. For owner-managers who want certainty over their proceeds and a genuinely clean exit, a locked-box structure is almost always preferable to a completion accounts mechanism.
Both of these points — W&I insurance requirements and locked-box pricing — should be addressed in the heads of terms negotiation, before exclusivity is granted. Once a buyer is in exclusivity, their leverage to resist these provisions increases significantly. A vendor represented by an experienced advisor will have these protections built in from the outset.
A note on timing
The best time to sell is when your business is performing well and you have the time and energy to run a proper process. Sector windows open and close — defence and aerospace supply chain is an exceptional market today; that window will not stay open indefinitely. Healthcare services businesses are attracting strong interest from both trade buyers and private equity. Technology businesses with proven revenue models continue to command premium multiples.
If you are considering a sale in the next one to three years, the most valuable thing you can do right now is have a confidential conversation with an experienced advisor — not to commit to anything, but to understand what your business is worth today, what would make it worth more, and what the process would look like on your timetable.
Odino Advisory provides confidential valuation indications and sell-side process advice to UK owner-managed businesses generating £1m EBITDA and above. There is no obligation and no fee for an initial conversation.
Begin a confidential conversation →When is the right time to sell your business?
A guide for UK owner-managers
The question of when to sell is one that most business owners ask themselves for years before they do anything about it. Get the timing right and a well-run process can generate life-changing proceeds. Get it wrong — by waiting too long, moving too early, or reacting to an approach without proper preparation — and the consequences can be equally significant. This article sets out the factors that should inform the decision.
Why timing matters more than most owners realise
Business value is not a fixed number. It moves — with trading performance, with sector conditions, with the availability of buyers and capital, and with the personal circumstances of the owner. A business worth £15m in one set of conditions might be worth £10m or £20m in another. The difference is not random: it reflects the interaction of market timing, business momentum, and process quality. Understanding those three variables is the starting point for any serious conversation about when to sell.
The other reality is that a sale process takes time. From the decision to engage an advisor to the receipt of funds in your bank account is typically six to nine months — and that assumes good preparation. Owners who wait until they are personally ready to exit often find that by the time they engage a process, their trading momentum has slowed, key staff have sensed change and become unsettled, or the sector window that made their business particularly attractive has begun to close. The best time to start thinking seriously about a sale is earlier than feels necessary.
The personal dimension: readiness is not just financial
Most owners focus on the financial question — will I get enough? — but the more difficult question is often personal. A business built over twenty or thirty years is not just an asset. It is an identity, a community, and in many cases the primary source of purpose and structure in an owner’s life. Owners who have not thought carefully about what comes next — what they will do, how they will spend their time, what will replace the significance of running the business — often experience profound difficulty in the period following a sale, regardless of the financial outcome.
This is not a reason to delay. It is a reason to think about it earlier, so that by the time you engage a process you have genuine clarity about what you want the next chapter to look like. Owners who arrive at a sale having thought carefully about their personal goals — for themselves, for their family, and for their employees — consistently make better decisions under the pressure of a live transaction than those who have not.
Business momentum: sell on the way up, not on the way down
The single most important timing principle in M&A is straightforward: acquirers pay for the future, not the past. A business with three consecutive years of revenue and EBITDA growth, a strong forward order book, and a credible growth narrative commands a fundamentally different multiple from one whose performance has plateaued — even if the absolute profit figures are similar.
The implication is clear. The optimal time to sell is when the business is performing well and the trajectory is upward — not when growth has stalled and a sale feels like the only option. Owners who delay until the business is under pressure, until they are exhausted, or until a key contract has been lost, will find that the market reflects those circumstances directly in the price offered.
A useful discipline is to commission a confidential valuation every two to three years, not because you intend to sell, but because it gives you an objective view of where the business sits in the market cycle and what would need to change to improve the outcome. Owners who do this are rarely surprised by the numbers when they eventually go to market.
Sector windows: some markets are significantly more attractive than others right now
M&A markets are not uniform. At any given moment, certain sectors are experiencing elevated buyer demand, compressed supply of quality assets, and premium multiples — while others are quiet or actively difficult. The difference between selling into a hot sector window and selling into a cold one can easily represent two to three turns of EBITDA on the price achieved.
In the current UK mid-market, two sectors stand out as particularly favourable for vendors.
Defence and aerospace supply chain is experiencing conditions that have not been seen in a generation. Sustained increases in NATO defence spending commitments, driven by the changed security environment in Europe, have created urgent and well-funded demand from both US and European prime contractors seeking to acquire certified UK supply chain businesses. The supply of high-quality, programme-relevant businesses is structurally limited — certifications, security clearances, and established programme relationships cannot be replicated quickly. For businesses with genuine programme relevance in this sector, the current market represents an exceptional window that prudent owners should take seriously.
Industrial technology is attracting significant private equity interest, driven by the combination of recurring revenue characteristics, strong margins in niche markets, and the broader industrial digitisation trend. PE buyers are actively seeking platform acquisitions and bolt-ons in precision engineering, sensors, automation, and specialist instrumentation — and are paying full multiples for businesses that meet their criteria.
Sector windows open and close. An owner in either of these sectors who is considering a sale in the next one to three years should factor current conditions into their timing decision. Waiting for perfect internal readiness while a favourable market passes is one of the most common and costly mistakes in owner-managed business exits.
The unsolicited approach: proceed with extreme caution
One of the most common — and most consequential — timing mistakes made by UK business owners is reacting to an unsolicited approach from a potential buyer without engaging an independent advisor and running a proper competitive process.
An unsolicited approach feels like good news. It is validation that the business is attractive, that someone wants it, and that a sale might be possible. In reality, it is almost always the opening move in a negotiation that the buyer has prepared for and the vendor has not. The buyer has identified your business, researched your financials, assessed your strategic value, and decided on a price range they are willing to pay — all before making contact. You are starting from zero.
The consequences are predictable. Without competitive tension — without other credible buyers in the process — the approaching party has no incentive to pay full price. They can take their time, conduct extensive due diligence, raise issues that chip the price, and ultimately complete at a number that reflects their interests rather than yours. The price agreed in a bilateral negotiation with an unsolicited buyer is almost always materially lower than what would have been achieved in a properly run competitive process with the same buyer in the room alongside others.
The right response to an unsolicited approach is not to reject it — the approaching party may well be the best buyer for your business. It is to thank them for their interest, take no further steps, and immediately engage an experienced advisor to run a process that uses their approach as the starting point for a competitive auction. In many cases, the approaching buyer ultimately pays more in a competitive process than they would have in a bilateral negotiation, because they are motivated and have revealed their hand.
Practical signals that the timing may be right
There is no single indicator that definitively signals the right time to sell. But the following combination of factors, when present simultaneously, creates conditions that are difficult to improve upon:
The business is growing — revenues, margins and order book are all in positive trajectory. Key management is in place and the business is not dependent on the owner for day-to-day operation. The sector is experiencing active buyer demand and premium multiples. The owner has personal clarity about what follows the sale. And there is sufficient time — at least twelve months — to run a proper process without pressure.
When those conditions align, the case for beginning a confidential conversation with an advisor is strong. When they do not — when trading is under pressure, succession is unclear, or the owner is not personally ready — the better course is usually to address those factors first, with a clear timeline for when the business will be ready to go to market.
The cost of waiting
Owners who delay a sale beyond the optimal window frequently discover that the circumstances which made delay feel prudent — a pending contract, a key hire, a product launch — are replaced by new reasons to wait. The cost of this pattern is real. Each year of delay carries opportunity cost: capital tied up in an illiquid asset, concentration of personal wealth in a single business, and the risk that trading performance, key staff, or sector conditions deteriorate in ways that permanently impair value.
The most useful reframe is this: a confidential conversation with an experienced M&A advisor costs nothing and commits you to nothing. What it provides is an objective view of what your business is worth today, what the process would look like, and what — if anything — would make it worth more. That information is valuable regardless of whether you decide to sell next year or in five years. Owners who have that conversation early are consistently better prepared, better advised, and better positioned when the moment does arrive.
Odino Advisory provides confidential timing and valuation assessments for UK owner-managed businesses generating £1m EBITDA and above. There is no obligation and no fee for an initial conversation.
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