What valuation multiple was used to price APi Group in the deal?

What valuation multiple was used to price APi Group in the deal?

• A. 3x EBITDA
• B. 7.4x TTM earnings
• C. 12x revenue
• D. 5x net income

Answer: (B)

Valuation multiples express how much buyers pay for a company relative to a financial metric. In this deal, the metric used is earnings—the profits the company earned over the last twelve months. Using trailing twelve months earnings provides a recent, stable view of profitability, smoothing out seasonal quirks and one-time items. A multiple of 7.4x means the buyer offered about 7.4 times those earnings, which is a typical earnings-based valuation for a deal in this sector. This focuses on profitability rather than top-line sales (revenue) or operating cash flow, and it avoids mixing in depreciation and amortization like an EBITDA multiple would. It also isn’t simply a multiple of net income, which can be more volatile or influenced by non-operational items. So the deal was priced at 7.4x TTM earnings because the transaction used earnings as the basis for value, rather than EBITDA, revenue, or net income alone.

Valuation multiples express how much buyers pay for a company relative to a financial metric. In this deal, the metric used is earnings—the profits the company earned over the last twelve months. Using trailing twelve months earnings provides a recent, stable view of profitability, smoothing out seasonal quirks and one-time items.

A multiple of 7.4x means the buyer offered about 7.4 times those earnings, which is a typical earnings-based valuation for a deal in this sector. This focuses on profitability rather than top-line sales (revenue) or operating cash flow, and it avoids mixing in depreciation and amortization like an EBITDA multiple would. It also isn’t simply a multiple of net income, which can be more volatile or influenced by non-operational items.

So the deal was priced at 7.4x TTM earnings because the transaction used earnings as the basis for value, rather than EBITDA, revenue, or net income alone.