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Frequently Asked Questions
How do acquirers evaluate a target's valuation before making an offer?
Acquirers run independent pre-diligence before committing to a valuation — verifying the business profile, assessing owner dependency, checking customer concentration, reviewing corporate structure, and scanning for litigation. AI tools like DeepDive's Argus generate a structured Target Report from 20+ sources in ~30 seconds, giving acquirers a verified baseline before they enter a seller conversation.
What are the most common valuation surprises that kill deals after LOI?
The most common late-stage deal killers are: revenue that cannot transfer because it depends on the owner's personal relationships; customer concentration hidden in top-line averages; EBITDA add-backs that don't hold up to scrutiny; deferred capital expenditures that create a buyer liability; and undisclosed litigation or regulatory exposure.
What EBITDA multiples are typical for lower middle market acquisitions?
According to PitchBook, lower middle market deals averaged 7.2x EBITDA for platform acquisitions and 5.8x for add-ons in 2024. Well-run businesses with recurring revenue, low customer concentration, and strong management can command 8-12x. Customer concentration above 20% and heavy owner dependency typically reduce multiples by 0.5-2.0 turns.
