How GovCon companies are valued for acquisition — what drives the multiple up or down, and the difference between enterprise and equity value.
The EBITDA multiple is how GovCon companies are valued for acquisition:
Enterprise Value = EBITDA x MultipleIf a company generates $5M in adjusted EBITDA and sells at an 8x multiple, the enterprise value is $40M.
| Multiple Range | Typical Profile |
|---|---|
| 4x – 6x | Small firms (< $25M), thin margins, customer concentration risk |
| 6x – 8x | Mid-market ($25M – $100M), solid recompete history, diversified |
| 8x – 10x | Larger firms ($100M+), strong growth, differentiated capabilities |
| 10x+ | Premium: cleared workforce, proprietary tech, high-demand NAICS |
These are enterprise value multiples, not equity multiples. The difference matters—enterprise value includes debt.
Higher multiples:
Lower multiples:
Equity Value = Enterprise Value - Net DebtIf enterprise value is $40M and the company has $8M in debt and $2M in cash:
The Operator's View
One of my bosses hated EBITDA multiples. I came to hate them too, though for a different reason—there’s simply too much focus and conversation around a number that most people don’t understand the origin of. His objection was more fundamental: he didn’t like how little anyone could explain about how a multiple was actually determined, or why it normalized the way it did within a given market segment. He used to say the multiple is the result of a lot of work, not the start of it. That stuck with me.
The EBITDA vs. revenue multiple debate is worth understanding. Low-margin, high-growth industries often trade on revenue multiples because the land grab is the value—future profit is the upside, and chasing it burdens the P&L today. More mature, stable, higher-margin industries trade on EBITDA multiples because margins are normalized and the revenue is what’s still to be captured. In simple terms: one is valuing growth because profit is the upside, the other is valuing profit because revenue is the upside.
But in either case, the valuation drives the multiple—not the other way around. The multiple is a proxy for the underlying work: the discounted cash flow, the comparable transactions, the judgment calls about risk and growth. The next time a multiple gets thrown around a table as if it’s a starting point, recognize it for what it actually is—a shorthand for an answer someone else already worked out. Make sure you understand the work behind it.