This morning I caught up with an investment banker focused exclusively on emerging consumer brands. You would be familiar with the logos on their page.
While he said 2024 looks to be better for valuations than 2023, the market is still rough. He was careful to note the following are all ballpark ranges and multiples will vary by segment and sub-segment and many other factors. He also noted that there is often discrepancies between multiples bankers will give companies when trying to win deals (especially from generalist firms) and where offers actually come in. The following are multiples from offers.
Sub $10 million sales brands who are profitable (~10% EBITDA margin)
→ multiples start around 4-5X of Twelve Month EBITDA (TTM EBITDA)
Sub $10 million brands, unprofitable
→ maybe inventory value
Larger brands in the $50 million sales who are profitable
→ start at 6-7X on TTM EBITDA
→ some multiple expansion for things like:
i) untapped channels and markets (for example, maybe it’s only a U.S. DTC business but can expand internationally or DTC but can expand to mass retail)
ii) recurring revenue (subscriptions, high retention rates for customers, high frequency of purchases)
iii) distinctive brand positioning like being recognized as the category leader