I can't tell you how many times I get asked this question. It's usually from owners who are considering putting their business on the market for sale. They're testing the waters, hoping the multiples are high enough so it they sell, they get to spend the rest of their lives on the beach.
And I typically give the same vague answer: It depends.
First and foremost, the multiple for the label and narrow web industry is subjective, not objective. It's based more on your company financials and individual performance than the industry as a whole.
Believe me, if you have a huge client base locked into long-term contracts, then I don't care what industry you're in. Your company is going to be worth more money than the industry.
Multiples do serve as a benchmark for some investors and companies, however. But let me share some research that shows how wide-ranging they can be.
PEERCOMPS COMPARABLE REPORT
We recently ran a PeerComps report to give us an idea of how much the multiples are for the printing industry.
A little background on PeerComps, which I've mentioned in previous columns. Launched in 1998, PeerComps and their affiliates have gathered information on over 8,000 transactions. These are companies that have been sold, and with each transaction categorized by NAICS code, industry classification, keyword or other financial variabilities.
Your research is only as good as your data pool, and it should be noted that this multiples report from PeerComps shows multiples based on 215 closed transactions. We don't know specifically how many of these closed transactions deal primarily in labels, as there is no NAICS code for labels and narrow web companies.
This report is based on the following NAICS codes, and it includes transactions (in parentheses) in the following specific areas:
323110 - Commercial Lithographic Printing (48)
323111 - Commercial Gravure Printing (1)
323113 - Commercial Screen Printing (40)
323114 - Quick Printing (29)
323115 - Digital Printing (5)
323117 - Books Printing (1)
323119 - Other Commercial Printing (92)
Perhaps not the greatest overview for the label industry, I know. But like all reports used by investors and lenders for benchmarking purposes, it does have some value. Let's take a look at the results.
The sales price on these transactions ranged from $125,000 to $2,950,000. The important numbers to investors are the Seller's Discretionary Earnings (SDE) and the Earnings Before Interest, Tax and Depreciation and...