Appliance Repair Valuation

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01
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Appliance Repair Valuation Multipliers

Two multiples that can be used to value privately-owned appliance repair services businesses are the EBITDA multiple and the revenue multiple. Please note that most of these multipliers were calculated by analyzing mergers & acquisitions (M&A) in the broader repair services sector (like the Consumer Repair Services sector) because reliable multiplies for the Appliance Repair Services sector do not exist in the public domain.

EBITDA MULTIPLE — REPAIR SERVICES

  • New York University's professor Aswath Damodaran compiled a 2018 list of annual EBITDA multiple estimates for various industries. Two relevant industry sectors on that list are Maintenance & Repair Services and Consumer Repair Services. Prof. Damodaran estimated the EBITDA multiple for both sectors to be at 11.07.
  • Orion Capital Group compiled a table of EBITDA multipliers for multiple industries using M&A data from Inc. Magazine. Repair Services, Not Elsewhere Classified is the sector that most closely matches the Appliance Repair Services sector. It has an EBITDA multiplier of 4.37.

REVENUE MULTIPLE — REPAIR SERVICES

  • The table from Orion Capital Group also contains median annual revenue and median sale price data for companies in the Repair Services, Not Elsewhere Classified sector. This data can be used to calculate a revenue multiple for the sector.
  • The median annual revenue for businesses in the sector was $583,000, while the median sale price was $425,000. The sale price needs to be divided by the revenue to determine the revenue multiple. Therefore, the revenue multiple for Repair Services was 0.73 ($425,000/$583,000=0.7289).

REVENUE MULTIPLE — APPLIANCE REPAIR SERVICES

  • Custom Business Sales, LLC identified a range for the revenue multiple of Appliance Repair Services businesses in an article from 2017. The identified range is 0.25-0.4 (25% to 40%).
  • While this is the only multiple for the Appliance Repair Services sector available in the public domain, it should be used with caution. The data is based on the company's internal research, without a provided methodology. The article was published on February 1, 2017, and valuation multiples across all industries have risen in 2018, and continued the trend in the first half of 2019.
Part
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Part
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Appliance Repair Valuation - Comparable Analysis

The valuation of California Appliance Services LLC & Florida Appliance Servicemen Inc. could be $3,780,313.09 (EBITDA multiple), or $2,371,287.01 (broader category revenue multiple), or $1,299,335.35 (revenue multiple). Please note that all valuation figures arrived through Comparable Analysis should be treated as estimates. That being said, the EBITDA multiple valuation takes several factors into account and is, therefore, probably the closest estimate of the actual valuation of the company. All calculations are explained below.

EBITDA MULTIPLE VALUATION

  • The previous response identified two EBITDA multiples that can be used to value companies in the Appliance Repair Services sector — The Consumer Repair Services multiple of 11.07, estimated by professor Aswath Damodaran, and the Repair Services, Not Elsewhere Classified multiple of 4.37, identified by Orion Capital Group through analyzing different M&A deals for the sector.
  • Companies in the Orion Capital Group sample have a median annual revenue of $583,000, which is nearly six times smaller than the $3,248,338.37 annual revenue of California Appliance Services LLC & Florida Appliance Servicemen Inc. Additionally, the sector identified by Orion seems to be broader than the sector identified by prof. Damodaran. Therefore, a weighted average of the two multiples is calculated below, assigning greater weight to the multiple identified by prof. Damodaran.
  • By assigning a weight of 0.7 to the first multiple (11.07) and a weight of 0.3 to the second multiple (4.37), a weighted average that best reflects the sale value of businesses in the Appliance Repair Services sector can be calculated. The weights were chosen to incorporate the above arguments related to source data, and also to reflect the fact that service companies derive most of their value from their customer base. The reason for using both data sources is that the one that appears to be more relevant is based on an estimate and not on actual sales data.
  • To calculate the weighted average of the EBITDA multiple, the first multiple should be multiplied by the first weight and the second multiple by the second weight, and then the two numbers should be added up (0.7 * 11.07 + 0.3 * 4.37 = 7.75 + 1.31 =9.06).
  • Finally, to arrive at the valuation, the EBITDA of California Appliance Services LLC & Florida Appliance Servicemen Inc. should be multiplied by the calculated multiple ($417,253.1 * 9.06 = $3,780,313.09)

REVENUE MULTIPLE — REPAIR SERVICES

  • The previously calculated revenue multiple for Repair Services, 0.73, can also be used to determine the valuation of California Appliance Services LLC & Florida Appliance Servicemen Inc.
  • To do this, the revenue of the company ($3,248,338.37) needs to be multiplied by the revenue multiple (0.73). Therefore, the valuation of California Appliance Services LLC & Florida Appliance Servicemen Inc. is $2,371,287.01 ($3,248,338.37 * 0.73 = $2,371,287.01).

REVENUE MULTIPLE — APPLIANCE REPAIR SERVICES

  • The range for the revenue multiple of Appliance Repair Services companies was previously determined to be between 0.25 and 0.4. This range was identified in 2017, and since then the multiples across all industries have steadily risen, so the top of the range should be used to determine the valuation of California Appliance Services LLC & Florida Appliance Servicemen Inc.
  • Therefore, the valuation of California Appliance Services LLC & Florida Appliance Servicemen Inc. is $1,299,335.35 ($3,248,338.37 * 0.4 = $1,299,335.35).
Sources
Sources